>>Unfortunately, the industry may be too small to fight what appears a concerted effort to get rid of it.
The question is, how are they going to regulate the discount firms out of business? Seems to me ironic that it's the inefficiency of their bread-and-butter market-order system that is causing all the trouble in the markets and will be their undoing.
I see an alternate route: The web-based trading companies like E-Trade, Waterhouse, DLJ Direct, etc. will become remote trading firms with systems like RealTick, and the era of the market-order gift to the MM's will end. Nasdaq volume will shift to the ECN's and Nasdaq will be forced to implement a similar model--which indeed they were developing last year before the MM's nixed it. It was going to be called a limit-order pool which would have ended up working something like the NYSE, or for that matter ISLD on a good day, when you see very large size on the inside. One indication that it is happening is brokers like GSCO buying a stake in an ECN like Archipelago. E-Trade also bought a quarter stake. I think I heard that they have plans to introduce remote trading. Once the market-order bonanza dries up MM's will have a hard time making money. The only way I can see for this not to happen is if the industry makes a concerted effort to stop it through regulation, but I really think the inevitable will happen. May take a few years. Or, maybe there's an apocalypse in the market and everybody loses interest and it goes back to the way it was.
wily |
