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Non-Tech : Bid /Ask Spreads - Market Manipulation
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To: Eric Hovdesven who wrote (51)8/30/1996 5:13:00 AM
From: NightOwl   of 308
 
Hello Eric, Robert and all,

This has been an interesting and most enlightening thread to follow. I have a question for whomever has an answer.

There seems to be a concensus amongst electronic investors that there is no need for MM's or NASDA's orchestrated market system. It appears that some investors are equally distrusting of the NYSE and AMEX, although I for one feel that the NYSE has eliminated the potential for much of the manipulation that appears to be rampant over the counter. Although, I hasten to add, it also appears that the only reason they have been so successful at this is because of the opportunity for corruption these same market players have over on the NASDAQ.

My question is why is there such doubt about the existence of capital sufficient to fund an electronic trading system as fair to the individual investor as any other participant?

The capital is there in the profits of those currently abusing the existing system. Where do those profits come from? Us I suspect. Whether its through our individual trades or through God awful mutual funds that often do no more than take another bite out of our hides.

Would we be willing to pay a premium to trade on an honest electronic system? Beyond doubt. So what's the hold up? IMHO, I would say there are three primary road blocks:
1) Most, but not all of the experts with the skill to organize such a venture are tied to the current system in one way or another;
2) Getting a substantial number of companies to list/participate in such a market; and
3) Governmental hostility resulting from the pressure of those reaping the rewards of the current system as well as the threat to their regulatory turf which such a direct trading system would present.

None of these problems seem insurmountable to me. Nor would I be surprised to learn that there were folks already taking steps to bring such a market about. In my view the Internet has created a new force which cannot be turned back. This very thread has given me and who knows how many others ideas and information of which I would have had absolutely no knowledge in its absence. The printed press is simply incapable of presenting the kind of expertise and data available here at the click of a mouse.

Do you think there would even be an SEC report today without the electronic discussions and debate that have been had here at SI and elsewhere? IMHO, its just the opening salvo of the natural tendency of the existing order to acclimate itself to this electronic marketplace. It isn't enough and everyone knows it; but the emporer is not yet ready to confess to his nudity. :- )

All of us may not live to see it; but if manufacturing workers and companies think they were turned upside down by the computer age, just wait to you hear the hue and cry from the financial services sector. This country is full of dealer/agent/broker "middlemen" who either are or will be feeling the heat of justifying their existence. Whining about it didn't help the labor unions and I doubt it will serve to protect their white collar brothers.

NightOwl.
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