In the mid-1960s, when a computer still filled a room, a Wall Street analyst named Jerome Pustilnik saw the potential for technology to transform stock markets. He teamed up with associates to found Institutional Networks Corp., later known as Instinet. When it launched its computerized-trading service in December 1969 with its first trade of 100,000 shares of Ford Motor stock, Mr. Pustilnik promised it would slash trading costs and cut out brokers and other middlemen.
He was right about cost savings but wrong about cutting out the role of brokers – at least not right away.
In the 1970s, Mr. Pustilnik persuaded pension funds and other institutional investors to pay fees to use bulky Instinet teletype terminals to make trades. “Then they made very, very little use of us,” he told Institutional Investor later. Pustinik raised money in the early 1980s to keep operations going and sold his stake in 1983, just as Reuters Holdings PLC began acquiring enough stock to gain control of the company. In 2005, Nasdaq Stock Market Inc. bought Instinet for $1.9 billion.
Before computers was paper paper paper: the floor of the NYSE in 1963 (photo by Thomas O’Halloran, Library of Congress)
Born to a Russian father and Polish mother in the Forest Hills section of the New York
borough of Queens, Pustilnik died on November 13, 2017 at the age of 89, a pioneer in the technology that helped make financial markets more accessible to more Americans by lowering trading costs from the $200 per trade level in the middle 1960s. His innovations are part of the several measures that democratized markets for the average investor in the 1970s, including the explosion of mutual funds, the end of fixed-rate brokerage commissions announced by the Securities and Exchange Commission under President Nixon in September 1973, and the raft of discount brokers that continue to lend liquidity to markets today. (WSJ, James Hagerty, Nov. 25)