Winners and losers in the securities industry
Winners and losers in the securities industry
This chapter focuses on a major force in the economy, and one that is key to the capitalist system: securities markets and the brokerage industry. Although Nasdaq online securities market was one of the first movers in electronic markets, when Electronic Communications Networks (ECNs) came along and siphoned a considerable amount of trade away, Nasdaq, with its very survival in question, took a long time to respond to the threat. The chapter relates the story of how organizational factors made it difficult for the most successful broker, Merrill Lynch, to respond with a new price structure for trading stocks when electronic brokerages like Schwab and e-Trade came along. These examples illustrate a winner’s curse that comes from complacency and the psychological and organizational factors that often prevent a winner from responding to new events and challenges.
Keywords: Nasdaq, ECN, NYSE, brokerage industry, electronic brokers, Merrill Lynch, Schwab, e-Trade
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