Fragmentation and Consolidation

Abstract

This chapter considers the changing structure of the securities industry. In particular, it analyses the centripetal forces pushing the trading of securities to consolidate on monopoly exchanges, and the centrifugal forces driving securities trading to fragment. ‘The tension between centrality, on the one hand, and competition, on the other, is probably the oldest of all market structure issues’ Arthur Levitt, Chairman of the SEC, Senate Banking Committee (SBC), 1999), and the current market structure reflects the present balance between these two opposite effects. Today’s technology may afford us the opportunity to better achieve these goals [to garner the benefits of centrality without stifling competition] — once thought to be mutually inconsistent’ (Arthur Levitt, 1999).