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OTC War and Peace

Traders Magazine, June 2002

John A. Byrne

The consolidation among investment banks and brokerage firms is as predictable as the rising sun. But for industry executives, it is as unnerving as a tornado that thunders through the land. The consolidation is propelled by a squeeze on profit margins, a squeeze that's a byproduct of the mass production of certain products and services. Sometimes it is the result of a vicious turn in the business cycle. The consolidation is the result of the repeal of the Glass-Steagall Act, the Great Depression law that once separated banking and brokerage activities. The consolidation is also the result of the natural competitive drive to capture market share in places where two or more firms operate. One change, in this heated atmosphere, was the departure by the Four Horsemen, from research, underwriting and trading in emerging growth companies. The quartet, which switched instead to trading Nasdaq's blue chips, is sometimes called the HARM group: shorthand for Hambrecht & Quist, Alex.Brown & Sons, Robertson Stephens and Montgomery Securities. The retreat by the firms was the wake-up call for a boutique investment banking firm, Adams, Harkness & Hill. The business is profiled in this month's cover story by Peter Chapman, who visited the firm's Boston headquarters.

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