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Behold The Republic

Traders Magazine, October 2001

John A. Byrne

The dealer markets are beholden to the Securities and Exchange Commission, as the U.S. bond markets are beholden to Japanese investors who purchase U.S. government securities. But the SEC must be attuned to public opinion. It is supposed to deliberate in a manner consistent with our best democratic traditions. Did it do so for Nasdaq? As we all know, the SEC is hell-bent in transforming Nasdaq into an auction market, a market operating on similar agency-style principles as the New York Stock Exchange. As the year draws to a close it looks as if the SEC, with the benevolent support of Nasdaq, is achieving that goal. Nasdaq desks are experiencing the shocks that come with revolutionary change: in this case, shrinking profit margins and excruciating readjustments. Is this the outcome of our best democratic traditions? An expert on these matters, Wayne Wagner, delved into the changes in Traders Magazine last September. And it so piqued some readers we thought it deserved an airing again. Wagner had several provocative predictions: the number of dealers will shrink; ECNs will continue to prosper; sponsors and managers will find comfort in soft-dollar arrangements on Nasdaq; organizations that monitor trade execution quality will find more customers; commissions on Nasdaq will accelerate the move toward more agency trading; cost-efficient firms will make up in volume what they have lost in bloated margins.

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