Quicker on the Draw in a Wall Street Showdown

By Wendy Cole

If you buy and sell stocks online, you want the quickest possible trades at the best possible price. Brokers promise you the sweetest deal available, but how can they guarantee that?

Their trick, in more and more cases, is to route the trade through Gerald Putnam's Archipelago. The Chicago firm, which created one of a new class of trading systems known as electronic communications networks (ECNs), can instantly determine where the best price is--on traditional markets, like the New York Stock Exchange, AMEX and NASDAQ, or among orders that come directly into Archipelago. Trades on the fully automated system are completed in less than a second, while a typical trade on the N.Y.S.E. takes 22 sec. "That's a lifetime in an active market," says CEO Putnam. "Our advantage comes from having no human intervention." Investors have been able to trade NASDAQ stocks via Archipelago since 1997, and the system got a huge boost this summer when it became the first ECN to quote stocks listed on the N.Y.S.E. and AMEX.

But Putnam, 42, who studied accounting at the University of Pennsylvania, wasn't content to run just a trading network. He's making Archipelago a full-fledged exchange this year by buying the equities arm of the Pacific Stock Exchange. This means that Archipelago will list companies on its own and try to lure blue chips away from other exchanges. If Putnam has his way, Wall Street will no longer be the best route to Easy Street.

--By Wendy Cole