FINE-TUNING TOMORROW'S MARKET
The financial-services industry faces dramatic upheaval. New cybermarkets that trade equities are eating the lunch of the Wall Street middlemen who have grown fat on fees from traditional markets. New technology is turning stock trading into a commodity business (page 66). New systems can, for example, match thousands of buy and sell orders for stocks in nanoseconds--and far cheaper than people can.
Ordinary investors are gung-ho. Trading stocks on the Net through discount brokers is becoming old hat. Electronic investors want their own, brokerless, direct access to stock market trading systems. Small investors will get better prices and cheaper deals. Meanwhile, markets abroad, such as London and Frankfurt, are racing to lure business with state-of-the-art technology that could expand global investing.
Gloomsters might argue that the new possibilities for fast-paced trading will make stock markets more volatile. On a computer keyboard, after all, the panic button is just another keystroke. The Securities & Exchange Commission
isn't worried. It insists that rules for existing markets during turbulent trading also must apply to cybermarkets. It is imposing some specific technical conditions on the fledgling markets, such as requiring that they have enough capacity to handle surges in activity. Otherwise, the SEC is rightly encouraging experiments without imposing onerous extra rules.
The trouble with the new systems is that they may tempt investors to trade before doing adequate research. Low-cost stock trading is great, but however cheap it becomes, it won't offset lousy investments. Even savvy investors are more likely to foul up if they don't do their homework. Financial information and advice is available on the Internet. Investors need to find what's solid and use it before they leap.
Wall Street has only itself to blame for its clients' unwillingness to pay high commissions for the advice that flows from traditional brokers. Many investors feel that these brokers provide endless buy recommendations--but little clear advice on when to sell. And many clients feel they're being palmed off with one-size-fits-all advice, despite all the promises to the contrary. Traditional brokers can win back investors with better advice. But wherever investors trade, the hope is that new competition will force the securities industry to provide guidance worth paying for.
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WHY INDIA'S RULING PARTY IS FLIRTING WITH DISASTER
In the Indian town of Ayodhya nothing remains of the mosque that Hindu fundamentalist mobs razed in 1992. A court order stopped extremists from building a temple there. But now, the Hindu nationalist Bharatiya Janata Party is running a coalition government, and BJP-affiliated groups are preparing materials needed for the temple. If it gets built, mobs may attack other mosques on disputed sites.
What's worrisome is the BJP's seeming inability--or unwillingness--to control events. Prime Minister A.B. Vajpayee won the March election by campaigning on a moderate, reform platform. Now, it is obvious that extreme elements inside the BJP are trying to isolate Vajpayee and impose their own agenda. This struggle is producing an ineffective economic policy and such dangerous acts as the nuclear tests in May and the bid to build a temple in Ayodhya.
INVESTOR FLIGHT. To political analysts, the group to fear is the Rashtriya Swayamsewak Sangh (RSS), which started in the 1930s as a grass-roots Hindu organization. Today, RSS hard-liners favor extreme nationalism in economic matters, the formation of paramilitary groups, and rewriting history textbooks to glorify Hindu heroes. The group wants to set the tone for the whole regime. ''I tell you,'' says Chandra Sekhar, a former Prime Minister and onetime admirer of Vajpayee, ''the BJP is nothing but the wing of the RSS.''
The dominant personality among the hard-liners is L.K. Advani, the home minister. It was Advani's associate Yashwant Sinha who managed to land the Finance Minister portfolio, outmaneuvering Vajpayee's candidate. Sinha then presented a budget that dealt a setback to earlier reforms. Opponents inside and outside the coalition have been picking apart his budget ever since, forcing Sinha to back down on such moves as new tariffs to protect textile makers. The mess has dismayed investors, who have driven Indian stocks down 11.6% since the budget's unveiling in June. Neither Advani nor Vajpayee would speak with BUSINESS WEEK.
The BJP's foreign policy, too, is filled with contradictions. Vajpayee authorized the nuclear tests partly to pacify hardcore elements of the RSS. Since the tests, though, he and his followers have tried to mend fences with the U.S., Pakistan, and the rest of the world. But Advani and other hard-liners continue to make bellicose statements about Pakistan and China, which has helped keep tensions simmering between India and its adversaries.
NO RETREAT. The next flash point is Ayodhya. Vajpayee says he will abide by the decision of the courts, which are considering claims that the site of the mosque belongs to Hindu groups. But RSS extremists insist the courts will rule in their favor. More alarming, they hint that they will not accept an adverse ruling. They say that no court can decide matters of religious sentiment and that they will press ahead with the temple.
BJP officials claim critics just don't understand their party. Says Mohan Guruswamy, a BJP adviser close to Advani: ''This is a nonmonolithic party with a spectrum of opinions, and reconciliation of those opinions can only be done by debate.'' Others figure that Advani would like to unseat Vajpayee but cannot risk a backlash. Coalition partners also prefer to deal with Vajpayee. Says Christophe Jaffralot, a French political scientist and authority on the BJP: ''Indians voted for Vajpayee, not the BJP.'' But as this rivalry plays out, the economy is slowing and the reform movement is losing momentum. It's a political drama India can ill afford.
EDITED BY CHRISTOPHER POWER
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IMHO: Here is a link for NOKIA Cover story article.
businessweek.com@@ulNQVGcANOL8DAAA/premium/32/covstory.htm
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