納斯達克交易所 (NDAQ) 2003 Q1 法說會逐字稿

Good day.

This is Pat and I will be your conference facilitator.

After the speaker's markers, there will be a question and answer period.

I will provide further instructions before we take questions.

As a reminder, this conference call is being recorded.

I would like to turn the conference call over to John Pitt, VP of Investor Relations at Instinet.

Mr. Pitt, you may begin the conference.

Good morning and welcome to the Instinet Group Conference Call to discuss First Quarter Results.

During this conference call, we may make statements that are forward-looking in nature.

Our actual results may be materially different from the results anticipated in those statements.

You can find a detailed discussion of certain important factors that could cause actual results to differ materially from our expectations in our annual report on form 10-K for the period ended December 31, 2002, and in other documents filed with the SEC which are available on our website.

Reconciliations to U.S. gap of non-gap financial measures referenced in this call, if any are set forth in the earnings release distributed today or will be made available on our website.

I will now hand the call over to Ed Nichol, Instinet's Chief Executive Officer.

Thanks John.

Good morning I am Ed Nichol, CEO of Instinet.

With me today is John Fay our CFO, who will review the company's first quarter results.

Also with us today is Jean-Marc Bouhelier, our Chief Operating Officer.

For my part I would like to offer some overview comments on our financial results provide an update on our ongoing integration efforts and reaching product and service highlights, and then offer some brief comments on the business opportunities before us in the coming month, in particular, with the (inaudible) listed trading, and how we are planning to take advantage of them to grow and strengthen our business.

First, (inaudible) key points from this quarter.

Instinet reported today a net loss of $34m or 10 cents per share, compared to a net loss of $112m or 34 cents per share for the fourth quarter of '02.

The pro forma operating loss was $6m or 2 cents per share for the first quarter of 03.

The pro forma operating loss excludes investment gains and losses, the effect of charges related to our recently announced cost reductions, insurance recovery for assets lost in the World Trade Center in '01 and related tax effects of these items.

John will discuss these items in more detail in a few minutes.

I would, however, like to offer a few thoughts on the numbers.

As I said before, our business is affected by overall trading volume.

While we have seen some fluctuations in volumes month-to-month, the general trend is disappointing in the U.S. and elsewhere.

Quarter-over-quarter, U.S. volume in the over-the-counter market is down 11% and year-over-year it is down 20%

Outside the US, we've also continued to see weak markets in the first quarter compared to previous quarters.

To help you better understand our business model, I'd like to continue our practice from the last earnings call, that is to distinguish pricing and volume trends for our buy and sell side customers.

On sell side.

In the first quarter of 2003, we saw a basically stable trend in unit pricing compared to the previous quarter following a substantial decline during (indiscernible) 2002, this includes Instinet and Island in both periods.

However, there was an 11% decline in sell side average daily volume in the first quarter from the previous quarter.

On the buy side, revenue per share was down 9% in the first quarter of '03, compared to the fourth quarter of 2002.

In contrast, to the sell side, however, this decline was mitigated by (technical difficulties) but our buy side average daily volume remained essentially unchanged quarter over quarter, and as in fact been by and large stable since the second quarter of last year.

We continue to make significant progress on Instinet and Island integration.

Early in the quarter, Island converted all of its trading activity to Instinet clearing services platform.

We also put in place a number of measures, including reduction of office space, rationalization of vendors' service contracts, optimization of client connectivity and re-organization of staffing programs and policies.

With regard to technology integration, we continue to make strides in integrating the Instinet Island matching engine.

These efforts will deliver to our clients' enhanced access to both order books.

By the end of April, we will have completed an important step, which will allow Instinet clients to receive full interaction with the Island order book.

That will be one more way to realize even greater value from our liquidity pools, which together constitute about 30% of NASDAQ listed volume, more than half again, is our next largest competitor, NASDAQ itself.

During the first quarter, Instinet also announced that as part of its continuing cost reduction effort, we would reduce our work force by approximately 175 employees, which is about 12% of our full time employees.

These reductions result from attrition and the elimination of positions expected to produce an estimated additional $20m reduction in annualized operating cost.

Let me also highlight a few other recent products and service's accomplishment.

Instinet trading portal, the company's new front end trading application was deployed at over 700 internet client sites by the end of the first quarter, well ahead of plan.

By quarter end over 25% of Instinet's total institutional order flow was been processed through portal.

New port, Instinet's global program trading and execution management solution, saw a 50% jump in client deployment during the quarter and global shares executed via new port rose 30% --- 36% on a value basis over the previous quarter.

In recent weeks, we have completed a project to make Instinet' costing acceptable through portal.

Customers will soon be able to route orders through the after hours cross, by choosing it as a destination in their order tickets and get next day execution reports delivered to their desktops.

Before turning the presentation over to John, let me say a few words about why Instinet's business model remains robust and highly competitive especially given what we are increasingly hearing from our largest customers, in brief our core customers.

Large institutions looking to trade large blocks with minimal market impact are more eager than ever to take advantage of our pure, un-conflicted agency services for the trading securities listed on US exchanges.

Specifically, these customers are looking for a state of the art electronically alternative to the floor based human intermediated market, which remains a defining feature of most US exchanges.

In this respect, we believe that there is an increase in demand for the heightened efficiency and anonymity and the richer functionality of electronic trade execution in the listed segment.

Instinet now makes the benefit to fully electronic ECN trading available for listed securities in a way that it's practical for traders.

This includes our ECN matching service, our after hours crossing service and our recently upgraded Smart Rouder (ph.) Our Smart Rouder now provides one stop access to the nearly 18% listed volume, which is traded away from the exchanges that is upstairs on Instinet, on Island, on other ECN and (inaudible) as well as access to the rest of the liquidity on the floor itself.

In addition, we will soon deliver to our customers products and services that help mitigate the opportunity cost of working an order upstairs.

This opportunity cost is the risk that liquidity at a better price or size is available on the floor, but is missed while the trader is working an order through Instinet.

To address this concern we will offer such products as advanced listed order slicing, an automated feature in which an order is simultaneously represented both in the upstairs market and on the floor, so as always to capture the best possible price and size available at any given time.

We also, of course, offer the services of our sales trading desk where a trader can work an order on a client's behalf both upstairs and on the floor.

In closing, I continue to believe that the most demanding and sophisticated investors are more and more recognizing (technical difficulties) the limitations and conflicts at the heart of a manual floor base model and will increasingly turn to the model Instinet offers, a fully electronic market place with customized products and services combined with our superior liquidity and trusted trading expertise.

That's how we will define the future of trading in partnership with our clients.

I'd now like to turn the call over to John Fay to discuss first quarter financials.

Thank you, Ed and good morning everyone.

I'm John Fay, Instinet's Chief Financial Officer.

I'd like to go over our first quarter results with you.

First I will discuss the market conditions during the first quarter and our business drivers and then turn to revenues and expenses.

As Ed stated earlier, Instinet net loss in the first quarter of 2003 was $34m or10cents per share, compared to a net loss of $112m or 34cents per share in the fourth quarter of 2002.

On a pro-forma basis, excluding non-operating items, our net loss in the first quarter of 2003 was $6m or 2 cents per share, compared to a net loss of $10m or 3 cents per share in the fourth quarter of 2002.

The pro-forma operating loss in the first quarter includes $22m of unrealized investment write down, an $11m charge related to our recently announced cost reduction, a $5m insurance recovery for assets lost at the world trade center at 2001 and the related tax effect these items.

We have included a reconciliation of the net loss to the pro-forma net loss as part of our press release.

Let's turn to the markets and our business drivers --we have been operating and continue to operate in very challenging markets, OTC market trading volume which is a primary driver of our revenue, with 1.46 billion shares per day in the first quarter of 2003, which was down 11% from the fourth quarter and down 20% from 1.8 billion in the year ago first quarter.

On a monthly basis during the first quarter of 2003, the OTC market average daily volume trend declined to 1.3 billion in February and while volumes increased during March, the volume has since returned to lower levels in April.

Outside the U.S. we've also continued to see weak trading conditions, these poor markets conditions have impacted and will continue to impact our revenues and our results.

However, in this difficult market and competitive environment, our relative performance has been strong, as evidenced by our market share position.

Our OTC market share held steady at 29.6% in the first quarter of 2003, compared to the fourth quarter of '02, and was up more than one third in the year ago first quarter, as Island and Instinet has been combined.

Our U.S. exchange lifted market share of 4.5% in the first quarter, was level with the fourth quarter of '02.

Turning to our daily volumes.

Our total U.S. share volumes for the quarter was 26.3 billion shares, which is down 15% from 31.2 billion in the fourth quarter.

This decline was due to lower overall market daily trading volumes, which I just discussed in the effect of fewer trading days.

The first quarter of '03 had 61 trading days, compared to 64 in the fourth quarter last year.

Looking at the average of our average daily volumes, our U.S. average daily share volume is 517 million shares per day during the first quarter down 10% from 575 in the fourth quarter.

This breaks down to OTC average daily volume of 432 million a day, down 11% from the fourth quarter of 2002, and lifted average daily volume of 85 million shares per day which was level with fourth quarter of 2002.

Now we'll turn to a high level overview of the financial.

On the top line basis, total revenues in the first quarter of 2003 were $240m, which included the $22m reduction in revenues due to the write-down on our investments.

Excluding losses on these investments and deducting the direct expenses of soft dollar, commission recapture and broker dealer rebate, our net revenues were $162m, which is down 10% from a comparable $180m in the fourth quarter of '02, as the effect of the 15% decline in our U.S. volume and a 13% decline in non U.S. net transaction revenues, were partially offset by higher market data revenues.

Our net U.S. transaction revenues per 100 shares were 19 cents per side in the first quarter of '03, which is up slightly from the 18 cents per share per side when we recorded in the fourth quarter of '02.

I think these slight increases due primarily to the nix of our business between buy and sell side customers and to the higher market data revenues in the first quarter of '03.

On the expense side, we have accomplished much of the 100 million annualized savings we announced in the fourth quarter.

Our fixed cost, which include one time items and variable expenses, declined by $25m to $141m in the first quarter from $166m in the fourth quarter of last year.

This $25m decline in the quarter was due primarily to lower comp and benefits expense, lower communications and lower other expenses.

We continue to be very focused on reducing our costs.

At the end of March we announced additional head count reductions of approximately 175 positions or 12% of employee base due to lay offs and attrition.

We expect to reduce our cost by additional $20m on an annualized basis from this reduction; these savings will be phased in over the second quarter of 2003 and be realized fully during the third quarter.

Now I'll review some specific expense items.

Compensation and benefits expense, was $64m in the first quarter of '03, and included a $9m charge for the 175-person reduction in force.

If you exclude this $9m item, compensation and benefits was down 10% sequentially from the fourth quarter, which is in line with the 10% decline in our average number of employees.

The average number employees declined --- decline in average number of employee is related to our December 2002 restructuring.

Our employee base was 1,428 globally at the end of the first quarter of 2003.

Down from 1,474 December 31,002.

Descending head count of 1428 reflects only partially the recently announced reduction in force.

I expect head count to be approximately 1300 by the end of the second quarter.

Brokers clearing exchange fees were $34m in the first quarter of 2003 which is down 8% from the $37m we reported in the fourth quarter due to lower volume and savings from the transition of Island to our in house clearing service, partially offset by higher US and international settlement costs as the number of transactions increased.

Communications and equipment expense of $31m in the first quarter of 2003, decreased from $36m in the fourth quarter due to lower costs associated with client lines as we migrate clients off our proprietary high speed network, as well as lower equipment and maintenance costs.

Occupancy expense of $16m in the fourth quarter of 2003 was level with fourth quarter of 2002 as reductions in rent expenses related to our restructuring in the fourth quarter were offset by a one time $1.2m expense for abandonment of space, related to our most recent 175 person reduction in force.

Other expenses were $8m in the first quarter, which is down from $16m in the fourth quarter of 2002.

The fourth quarter of 2002 included $4m of additional bad debt expenses for loans we had made to strategic partners.

The remainder of the decline is due to lower interest expense and discretionary costs such as travel and office costs.

Just returning to some of the one time items during the quarter.

In the first quarter we recorded net investment losses on non-marketable securities and securities owned (technical difficulty) (inaudible).

This included write downs to our investments in Archipelago (ph.) and NASDAQ as well as some of our other investments.

We reviewed our carrying value of these investments in light of changes in market conditions in the first quarter and marked them appropriately.

In the first quarter we also received an insurance recovery of $5m related to our loss of assets in the World Trade Center.

The loss we recorded in 2001 looks at the net book value of these assets while our insurance claim is based upon replacement costs.

The $5m gain represents the excess of the refunds that we've received over the net book value of the assets that we've wrote off.

I'd like to now just turn to Instinet's financial position briefly.

Our balance sheet remains very strong with $540m of net cash and marketable securities and no debt.

This is down form approximately $600m in the fourth quarter due primarily to seasonal payments in the first quarter of '02, excuse me, the first quarter of 2003 for 2002 incentive payments, as well as severance payments.

So in closing, I believe that our strong balance sheet along with our continuing focus on cost gives us a very stable platform from which to serve our customers and from which to compete in this tough environment.

At this time I will hand the call over to John Pitt (ph) our head of investors relations.

Thank you.

Operator we are ready to take questions.

Thank you.

We will now begin the question and answer segment of this conference.

If you have a question now are at any time during the remainder of the call, please press the number 1 on your telephone keypad and listen for a tone.

The tone indicates that your line has been placed in queue to have your question answered.

Please make sure to take your phone off mute as soon as you hear the tone.

Questions will be answered in the order that they are received.

When it is your turn I will call your name.

If you are using a speakerphone please pick up the hand set before speaking.

Begin by stating your name and then ask your question.

You can withdraw your question at any time by pressing the (inaudible).

And our first question today is from Daniel Saphoric (ph) of Risk Water Group.

Hello.

Hello.

Hi this is Dan Saphoric, Trading Technology Week, Risk Water's Group.

I don't know if this has been gone over at this point I suspect that it hasn't.

But I want to find out if there is a bit of a technology update in your report today?

I know that there is a summary in the later portion of your release of the achievements thus far.

It seems like the new port and portal products are really taking off.

I was most intrigued however, by the statement from Mr. Nicoll, "over the coming months we will seize the opportunity to provide our customers enhanced automated services for the trading of US listed securities".

Can any one expand on that a little bit?

I think I'd like Jean-Marc to do that, if he would.

Okay.

We have actually already delivered a little bit more functionality to our customers as Ed explained and the first bit of functionality is that in our attempt to provide customers with best indication regardless of where the best price is.

You can now using Instinet's mouse routing technology, route your order not just to Instinet liquidity, but actually to all the liquidity available upstairs on other ECNs and (inaudible) as well as manually route it out.

Okay.

That's sort of phase one of the development and that functionality was made available to our customers or to a subset of our customers (inaudible).

What we are going to do in the next phase is actually give you the ability to represent your orders upstairs and downstairs and automatically shift between those two market places depending on where the best indication is.

Which will allow our customers to get exposure to the upstairs floor as well as not miss (inaudible) on the floor.

And it's some thing that we actually already have available on the new port back home, that we are using when we trade our customer orders.

And we will make that functionality available through new port and then through the entire Instinet platform over the next 3 or 4 months.

Thank you.

Our next question is from Daniel Goldberg of Bear Stearns, please state your name and ask your question.

Bear Stearns.

Just to -I guess a couple of questions, first of all, wanted to just get I guess a little clarity.

If you could walk us through the total expense reduction;

I know you talked about 120m prior to today's announcement and now I guess as a result of some strategic moves you're looking to cut another, is it 20-30m?

If you could just kind of walk us through the ins and outs, then that would be helpful.

Okay, Daniel.

It's John Fay.

Just to clarify in the fourth quarter, we announced that we would as part of the integration of Island; reduce our cost by a $100m by the end of the fourth quarter of '03 on an annualized basis.

In addition, at the end of March, we announced that we would add to that another $20m, so the total is a $120m.

So, the - - just a walk back a bit, the $100m was off the combined expenses of both Instinet and Island's in the third quarter, numbers which were not published.

So, -- what I would suggest is, the best way to look at Instinet's expenses -- at this point, we have two quarters of Instinet plus Island combined, is to look at that which has been published for the fourth quarter and the first quarter.

And if you do that, you will see that our operating expenses have declined by $25m.

There is really three big pieces to that.

The first is compensation and benefits, which declined, -- if you exclude the $9m severance charge in the first quarter, [inaudible] about $6m, fourth quarter to first.

And that decline is related to lower head count, which part of the fourth quarter restructuring charge.

And I think that -- most of the impact of that fourth quarter charge is now in the first quarter, although, we'll get a little more of it in the second quarter.

The second big decline is in communications and equipment, which declined about $6m from the fourth quarter to the first quarter. - - [Inaudible] two things driving that.

As you know, we are migrating our clients off of our proprietary high speed network to a third party in (Technical Difficulties) -- at our cost for that net work and for their lines go down.

The second piece in the communications and equipment - - relates mostly to maintenance and soft ware.

We have been able to (Technical Difficulties) as we have combined Instinet and Island, go out and re-negotiate some of our software agreements, and between the two firms been able to reduce costs.

The third big chunk of the $25m reduction fourth quarter to first is in other, and that's $8m.

Four of which relates to the provisions for bad debt which we disclosed to you in the fourth the quarter.

And then the remainder is interest and other discretionary expenses, such as office and travel and we have, as part of our cost reduction programs been looking hard at all of our discretionary costs and been able to reduce those.

So the direction of those line items, in terms -- are moving around a bit and I think we'll see that on a quarter-to-quarter basis, but those are bi, significant changes.

Okay.

And then in terms of the convergence of Island's Instinet clearing -- In the release, you say, expected to significantly reduce clearing cost.

Is that something outside of what you just mentioned and should we --- you know, what should we look for in terms of that line?

(Technical difficulties) the decline in the quarter by about $2m and some of that savings is the result of the integration of Island and - but of course, there are other things that drive our clearing cost outside the US in terms of international clearances, it is a bit of mix between international and US and international and buy-side.

So, it's difficult to put a hard number on clearing (inaudible) It loses volume for the most part and I think the amount we reported in the quarter will go down with Islands in there for a full quarter, I think it was in there for a little over two months.

So I think --- you know --- that's what you should expect to see.

Okay.

In terms of shares per trade, looks like it decreased quarter over quarter, about 19%, any reasons driving that?

(Inaudible) (Technical Difficulties).

If you look at our institutional business, the --- we had a lot more business in percentage from the quamps(ph.)and the hedge funds, we turned to trade smaller size than the traditional mutual funds, like the money mergers were much quieter, so the business mix basically took the average share per trade down.

Okay.

And just finally, any comment on NASDAQ's announcement on the new CEO Robert Gray Fullvin (ph.) and what impact that might have on your business, or just market structure in general?

Well, we wish him well.

I know Bob, and you know, he's got a tough job ahead of him and we are very much concerned about the (inaudible) (technical difficulty) -- the market place was very much concerned about the overall health of the NASDAQ market place and wish him all the best.

Okay.

Thank you.

Our next question is from Charlotte Chamberlain of Jeffries and Company.

Please state your name and ask your question.

Yes, good morning.

When you were going over the prices, apparently the price --- the buy side price came down for the first time that I remember, and I was wondering, is there a mix issue there or did you start cutting prices for the buy side clients?

And then also I was wondering, if you kind of give us a sense of the cross that you're doing now, the one in the day and one after the day, of what percentage of your volume is coming through those two crosses?

Thanks very much.

Why don't I let you handle that Jean?

I mean basically --- I think there is, you know, a very long-term decline in buy side pricing, and one that everybody in this business has to deal with, but specifically I think the quarter --- the issue --- the decline came from business mix.

I mean, there are two things that impact our buy side pricing; one is that, as you know Charlotte, about six months or a year ago we introduced such pricing so we said to our customer depending on what service level you are consuming, we will charge you different rates to reflect the economy because that transactions for us and for you.

And what we've seen is, we've seen people using our tools and using the electronic more so the percentage of the institutional business that we get fully electronic had actually gone up.

The second thing that's specific to this quarter is that, the percentage of business coming -- the traditional fund managers, specifically in February was very, very low, so the business mix was much more towards quamps and hedge funds, would tend to use the electronic more and therefore tend to have an average price point which is lower and therefore took the average a little bit down.

As far as your question on the cross, we're actually only running one cross.

Oh I'm sorry, I thought you had one in the middle of the day?

At this point in time we're running one at the end of the day and that cross has had fairly stable (technical difficulties) over the last 12 to 18 months, we've not seen - we have natural seasonal variations, but we've not seen major big increase or big decrease of that volume.

We are actually working on introducing potentially a few more crossing products in the next two quarters, probably one in the U.S. and probably one in Europe.

But I think we'll talk to you about that when we have more details of those products.

Great thanks so much.

You're welcome.

Our next question is from Richard Repetto (ph) of Putnam Lovell.

Yeah, hi guys first direct follow-up to the question just asked, John Mark.

You know, you get IPG, you know coming directly face (technical difficulties) - - face to head on competition, the after hours cross, you know, you got the pricing lowered to your - - to around the penny level, so you did mention you're thinking about new crossing products, what I'm guessing that would be some sort of an InterDay (ph.) product, you know, if they're willing to go after your market share.

Am I assuming that's - - am I making the right assumption.

I think you are.

And part - - your after hours cross is done at, you know, I'm told somewhere around a penny.

The InterDay pauses them at 2 cents, would it likely be more done at the penny level or what sort of pricing are you even contemplating.

I just want to qualify my own self.

One is that, we had a plan to introduce new crosses this year, both in the U.S. and in Europe, before ITT decided to come and compete with us in the after hours.

You know, obviously we've accelerated those plans a little bit in response.

To as far as pricing is concerned we have not (inaudible) at what price, we would launch those cross, but you know, you can expect us to be very competitive.

Okay, And then I see (inaudible) Tech, this is again a follow-on, but in the write-up, in the release about the after hours cross is integrated with Portal and Newport, so I would assume it's very easy to sort of add in the after hours cross that - - you know, off the same sort of connections, is that - - would that be correct.

Well you can already from new port wrap to the cross, as of this month we're releasing a new version of Portal that allows you to wrap to the cross, and you know, obviously our objective is to make as seamless as possible for people to trade into our crossing product and also use our other services to aid in (inaudible) or trade their products.

So you can expect a full integration of the product and the facilities as we bring you crossing sessions.

Gotcha, Okay.

And then a little bit on what you've - - you sounded, in my opinion, of aggressive on the listed front, and I understand the - - you know, you've definitely increased the routing capabilities to the - - its Ks destinations.

But I guess my question is, you know, on the execution side, you know, how are - - and I - - it seemed very innovative this - - this where you can get the same pricing floor versus upstairs, if - - could you just give us a little bit more color on that?

Because other than that, it sill seems to me if you're looking for block trade execution there still isn't anything different now as compared to say a quarter ago.

Or am I wrong?

Well --- two things, one is that we are internally using the new functionality, which I've described.

When we use that functionality and we measure what we call the up-stairs match.

And by that what we mean is if someone gives me 100,000 shares to trade, how many of the shares are traded upstairs and how many of them are traded on the floor.

With the new functionality when we use it to sell it our customers order we've actually moved from crossing 20% of the floor upstairs to crossing 60% of the floor upstairs.

And what is the reason for that is that a lot of our --- before we had that functionality, you know, customers were not protected.

And by that what I mean is that they either had their order on Instinet or they had their order on the floor.

But we did not provide them with the functionality where they could actually represent in those places.

So their natural tendency, as you say, was to go to the floor.

And even when we were servicing their order they would ask us to go to the floor because they did not want to mis-price.

With that new functionality we have the (inaudible) to represent the order upstairs and as you know we have lot of even liquidity.

So actually by representing those orders upstairs, they actually find much more natural match than people would expect.

And we are starting to get a good experience with it.

Our ambition is obviously to make that functionality available not just to our traders, but to our customers through all our platforms and we believe that the more people would be using it and the better that upstairs returns will be, and the same ways we have managed to build significant upstairs liquidity and (technical difficulty) we expect to do the same thing on listing.

Okay.

And very last question is you mentioned maybe a quarter or two ago about this product called "targeted offers", is that --- could you review the status of that, and is that in anyway tied into any of this new functionality?

No.

We have actually delayed the launch of that product, because we have decided that from a priority perspective our customers were actually more interested in getting the listed slicing.

But we will probably still launch the product early this year.

Okay.

Thank you much.

I'll try to come back around in the queue.

At this time there are no further questions.

Thank you.

Oh, we have a repeat question from Mr. Repetto.

That was quick;

I'm back in the queue.

Just a quick -- on the expense side, first are you breaking out what the drag from international is on EPS, John.

We don't disclose international separately.

Okay, and then on the expense phase - this is sort of a follow up to an earlier question, I can clearly see it's transparent to $25m in fix cost, it's been taken out quarter to quarter.

But again it's difficult to see (technical difficulties) when we have $120m - you know if that's the sort of a yardstick.

It's tough to see where we are on the yard stick especially since, you know, if you look at 3Q fixed expenses were even lower than 1Q.

And I know that Island wasn't there for the entire amount of the quarter.

But can you give us a feel for how far along this $120m in savings yard stick we are, you know after - basically after you add the $125m this quarter to quarter.

Just first of all remember the $120, you know, is from the first quarter, okay.

And that's not banked into the first quarter at all.

So let's focus on the 100 and then you can add the 20 in on top of that all right Rich?

So with respect to the 100, I think where one could say that we have already achieved the $100m in savings because we are down $25m in the first quarter in terms of the fixed expenses.

We are not making that claim because, simply because, you know the - some of the categories are not, you know we haven't achieved all the savings in some of the categories that we expect to save.

For instance in occupancy, we expect to see significant savings - but they are going to move around a little bit.

I mean, clearly we're already down $100m on an annualized basis.

Okay that helps a bit, but we could talk more.

I think that's fine.

I think you know Rich, I'd be glad to talk to you about it.

You know, as Ed said, I think there is another $20m coming off the current comp level, which is what we have announced.

And then as I have said in the last conference call, if you recall, we are running it about $4m to 5 a quarter.

Right now of accelerated amortization of we sold, which is in the depreciation expense that will fall off in the fourth quarter for the most part.

And then we expect to continue to see communications cost savings as we migrate our clients.

And we have a plan to do that -- some of those are in this quarter.

So with that said, you know, I think the costs are down a $100m form the fourth quarter and we are continuing to focus on executing on our plan to reduce cost.

So you know, you should take the quarter as it is and look forward from it.

I would - I would always expect there to be one-time items moving up and down amongst the line items of a small nature.

Okay great.

Thanks guys.

At this time that will be all the questions, thank you.

Thank you for participating in this Instinet's first quarter earnings call.

The web cast of this call will be available for replay later today and a transcript will be available on our website within the next few days.