The Department of Justice (DOJ) is looking into the Nasdaq Stock Market's proposed $190-million takeover of SunGard-owned broker-dealer Brut ECN, due to possible antitrust concerns.

"The DOJ has started asking some ECNs about the possible impact of the Nasdaq-Brut merger," an industry source told Securities Industry News.

A spokeswoman for the DOJ confirmed that an investigation was recently initiated to see whether the deal, announced in late May, raised potential antitrust issues. Nasdaq and SunGard were not immediately available for comment.

The DOJ did not object in 2002, when Instinet bought rival Island--now merged into the dominant Inet Ats--or when then-Archipelago (now the ArcaEx exchange) acquired competitors RediBook and GlobeNet.

Nasdaq, which has been struggling for months with a declining market share, would see its transaction volume surge with the addition of Brut, the second-largest ECN. A deal would leave three main players in the Nasdaq marketplace: Nasdaq, ArcaEx and Inet. In May, Nasdaq controlled 46.7 percent of overall Nasdaq share volume, but that figure included an undisclosed percentage of market participants' internalized trades reported to Nasdaq. Last month, the Inet ATS' market share stood at 25.3 percent and ArcaEx’s at 19.2 percent.

Brut is a top liquidity provider to Nasdaq's SuperMontage but reports its internally matched trades to the Boston Stock Exchange, which amounted to 8.7 percent of Nasdaq volume in May. Brut’s overall market share is estimated at about 13 percent. According to industry sources, Brut also held talks with Inet when it was looking for a buyer but Nasdaq made a better offer. The sources said Inet is considering becoming an exchange, most likely via an alliance with the National Stock Exchange, similar to the one between ArcaEx and its self-regulatory organization, the Pacific Exchange. Before the Nasdaq-Brut merger was announced, Inet had said it would move to SuperMontage and license its smart routing technology to Nasdaq.

But the proposed acquisition of Brut apparently put an end to that plan, with Nasdaq saying it would use Brut's technology for smart routing. With Brut's acquisition, Nasdaq would ensure it could route to other market centers that cannot refuse access to broker-dealers.

ArcaEx pioneered that model when it used its own broker-dealer, now known as Archipelago Securities, to access Nasdaq. Although Nasdaq objected to the arrangement at the time, the Securities and Exchange Commission affirmed that it conformed to securities laws.