The buying and selling of stock has come a long way since lower Manhattan hustlers hawked their wares on the curb of Beaver Street. At least then you were left in little doubt about market risks as you repaired to the smoky din of a coffee house to seal the deal over a tankard.
Today stock markets aim to downplay risk by projecting one of two images: sleek, muscled technology or solemn, solid establishment. Under the latter, stock exchange publicity shots from Tokyo or Indonesia depict granite hangers lined with neat ranks of desks. Meanwhile, the Nasdaq Stock Market evokes the dazzling light and circuitry of a video game arcade while the Toronto Stock Exchange finally abandoned its trading floor after a long struggle with technology that left no-one in doubt about the costly tangle of wires behind any exchange’s facade of cool efficiency.
The New York Stock Exchange is an exception – and an anachronism. Its jumbled array of machinery and chaotic lay-out of color and design (brokers are responsible for outfitting and decorating their own trading booths) looks like Comdex crossed with the Grand Bazaar.
No matter which image it projects, though, each market wants the investing public to see it as the central point for trading stocks. Even the NYSE’s nickname, the Big Board, suggests a giant display that everyone in the world focuses on.
And now, just as the world is getting comfortable with this model of a stock exchange, the image is shattering. Just as millions of individual investors are starting to forget about the wizards – the men behind the curtain of technology who are, after all, just as prone to foibles as Beaver Street’s curb-side punters – the model is breaking up.
The major stock markets have long viewed electronic communications networks (ECNs) such as Instinet as scavengers stealing in for scraps. Same goes for third-market brokers which bypass the exchanges and set their own prices after hours. Lately it has come to light not only that Nasdaq has been flirting with an alliance with Instinet, but that the Big Board has been consorting with the enemy too – contemplating an alliance with an ECN or even purchasing one outright.
Imagine the confusion as the exchanges embrace the fragmented trading model of ECNs, which trade stocks basically anywhere or anytime, off-exchange or on. Envision, also, the heavy PR machinery needed to convince investors of the exchange’s supremacy when stock flows through a lattice of disparate vessels instead of one big pipeline. The fragile trust of millions of individual investors – already shaken by the wild west of online trading – will need to be handled carefully indeed.
