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April 1, 1999

What's the Game Plan?

By Lee Korins

To the casual observer, the recent machinations in the transaction-services industry could lead one to ask the question: Where are we going and how do we hope to get there?

We've seen electronic communications networks (ECNs) become pseudo-exchanges and market centers. We've seen exchanges announce mergers and then call them off. We've seen the National Association of Securities Dealers take over a listed exchange to offer, in its own words, the best of both worlds. And we've seen just an announcement of an electronic option exchange, (the International Securities Exchange, or ISE) to be launched next year, serve as a catalyst to cut rates almost in half on the current options exchanges.

The granddaddy of them all came when the New York Stock Exchange announced that it might want a piece of its turf to look like Nasdaq, or an ECN, or maybe both.

The Momentum

If you ask the question as to what is driving this momentum, the answer always comes back to technology. Truth is, technology is only a road, an avenue, not an ultimate destination. We are striking out in all these directions because no one has a grand design and everyone believes in the old adage that movement is progress, even if we know not the ultimate objective.

It's about time that we begin to determine what we want this marketplace to look like, rather that become the unwilling victims of chance. That course may not get us where we want to go. If we think that what is going on right now will lead to the best of all worlds for every participant, then that's fine. But let's try to insure that there is no rude awakening at the end of this road.

I have always been a laissez-faire person who believes that competition will produce great results. But certain venues require minimum levels of acceptance and credibility before we ascend to the next stop. Our securities markets, tested over two centuries and the envy of the rest of the world, are such places.

Let anyone tell me that unrestrained competition has produced a better class of service in the airline industry in the 1990s. We've turned most of them into facsimiles of the cross-country buses of another era. Hardly the result imagined when we began the trip.

Moratorium

It's time to step back, assess the capabilities of what we have and what we might create. Possibly, have the regulators declare a short moratorium period. After all, they did that about 20 years ago when the first options exchanges were being launched one right after another. Then proceed ahead with a game plan created by all participants.

The Security Traders Association, along with the Securities Industry Association, the NASD and the NYSE, as well as the other stock exchanges, could bring the elements of the new marketplace together and work out a blueprint that continues, without risk of interruption, the capital-raising processing of the markets. That is the true strength of our system, and it has been of unique benefit to companies and investors alike. Why not give logic a chance?

We have a great opportunity to create change and be the master of this change. To have it any other way would be unfair to investors in the new millenium.

Lee Korins is president and chief executive of the Security Traders Association.