Darwinism vs. Protectionism In the US Equity Markets; the Case for Real Competition

Conclusion

In comparison to what we have now, a competing electronic market system is a far simpler and economically superior way of bringing buyers and sellers together. It would be less expensive and it would be fairer. There is another compelling reason to make this change. The world’s electronic markets can, and inevitably will, compete with each other on the global stage as venues for providing investors with the best trading performance and issuers with the lowest cost of capital. It is easy for us in the US to be lazy about this since we don’t have real competition within or between our national exchanges, and foreign-based exchanges can’t effectively compete here. However, if recent history teaches us a lesson, it is that these anti-competitive barriers will be eroded by the powers of natural selection and evolution. In just a few months, for example, Frankfurt stole the German bond futures business from London because of the superior efficiency of its electronic platform. As unlikely as it seems, the same thing could happen with our high-tech stocks. In sum, we are at an important juncture in the evolution of our markets. It is clear to me that we have a basic choice about whether we will let competitive forces get on with market evolution or whether we will try to out-guess mother nature by way of protectionism. By now, you probably know where I stand, and I hope some of you have been encouraged to stand with me as a voice for more broad-sweeping change.

This chapter is based on the transcript of the conference, The Electronic Call Auction: New Answers to Old Questions, held at Baruch College/CUNY on May 16, 2000.

At the time of the conference, Douglas Atkin was President and CEO of Instinet Corporation.