Nasdaq, which has been struggling for months with a declining market share, is buying the second-largest ECN, SunGard's Brut, for $190 million in cash.

The acquisition will leave three main players in the Nasdaq marketplace-Nasdaq, ArcaEx and Inet.

According to industry sources, SunGard had been shopping Brut around in recent weeks, including to Inet, the dominant ATS created earlier this year by the fusion of the Island and Instinet sister ECNs.

With the acquisition of a broker-dealer, Nasdaq is following the outbound model pioneered by ArcaEx, which is using its own brokerage subsidiary to access other markets. This likely puts an end to previously announced plans for Inet--which quotes on the National Stock Exchange--to move to Nasdaq, provided that Nasdaq would use Inet's smart-router technology.

Brut was engaged in merger talks with Inet, which would have created a formidable competitor commanding nearly 40 percent of Nasdaq's overall volume. This would have threatened Nasdaq's role as the primary market in its own listings.

Nasdaq no longer separately releases volume executed on its SuperMontage platform and bundles the data with other trades, for an overall market share of about 48 percent.

"We would be interested in thinking about it," Nasdaq CEO Robert Greifeld recently told Securities Industry News, when asked whether he would try to thwart Inet's possible plan for Brut with a bid of his own.

While electronic execution venues operate on razor-thin margins and report tiny profits, cutthroat competition continues to put a premium on strategic mergers. The $190-million price tag for Brut is, however, much lower than the $500-million figure involved in Instinet's purchase of Island in September 2000. Island, at the time, commanded a market share comparable to Brut’s today.

"The question is whether or not there are willing buyers and sellers at prices that can clear the marketplace, and that remains to be seen," said Instinet CEO Ed Nicoll, when recently asked whether he would push ahead with a bid for Brut.

With the acquisition, Brut returns to its founder. Greifeld created the ECN in 1998, as part of a consortium that included Knight Trading, Morgan Stanley and Merrill Lynch. SunGard bought out its partners in Brut last year. The ECN is particularly attractive to active traders, a fast-growing constituency that Nasdaq has been courting lately by adding FIX connectivity and improving SuperMontage functionality.

Brut quotes on SuperMontage but reports its internalized trades to the Boston Stock Exchange, a factor that further contributed to Nasdaq's market share slide.

"This is just one more step in Nasdaq's multi-pronged strategy to increase our share of trading, raise the number of Nasdaq-listed companies, reinforce Nasdaq's status as the premier U.S. equity market and serve investors better," Greifeld said of the acquisition, which is expected to close in the third quarter.