E*Trade reviewing order handling practices

Fri Nov 2, 2012 8:49pm EDT

Nov 2 (Reuters) - Online brokerage E*Trade Financial Corp has initiated a review of its order handling practices after one of its directors questioned the efficiency of its services.

E*Trade did not name the director but The Wall Street Journal on Friday identified the director as Citadel's Kenneth Griffin, citing people familiar with the discussions.

The Chicago-based hedge fund manager is the founder and chief executive of Citadel LLC, which owns a majority 9.59 percent stake in E*Trade, according to Thomson Reuters data.

E*Trade said in a filing that the review of its order handling practices and pricing for order flow between E*Trade Securities LLC and its registered market-maker is being conducted by outside firms.

The firms have suggested changes to provide "best execution" - getting its customers the best prices for their trades in the shortest time.

"The company agrees with these recommendations and is implementing them," New York-based online financial services company said in the filing on Thursday.

E*Trade, which has been hampered by bad loans in its banking unit, has long been considered a potential takeover target, but has concluded twice in the past two years that the time was not right for a sale.

Citadel was the most vocal advocate for putting E*Trade up for sale, saying in a letter to the firm last summer it had endured enough after "nearly four years of value destruction and lost opportunity." [ID:nL2E8K5I7J