Stock Market ConsolidationBy William CatePublished November 1999[http://home.earthlink.net/~beowulfinvestments/] [http://home.earthlink.net/~beowulfinvestments/globalvillageinvestmentclubwelcome/] The...
Stock Market Consolidation By William Cate Published November 1999 [http://home.earthlink.net/~beowulfinvestments/] [http://home.earthlink.net/~beowulfinvestments/globalvillageinvestmentclubwelcome/]
The National Association of Securities Dealers (NASD) has a vision. They see two North American Markets by 2010. They see the New York Stock Exchange (NYSE) as the "traditional" Market. The NASD expects to own everything else. They'll be the Market of Cyberspace. Since they operate Nasdaq, the second largest market in the States, their vision isn't wishful thinking.
The NASD has acquired the American Stock Exchange (AMEX) and the Philadelphia Stock Exchange. They are trying to acquire the remaining regional American Stock Exchanges. They intend to include the Toronto Stock Exchange (TSE) in their vision.
The NASD will sell the Over-the-Counter Bulletin Board (OTCBB) in the next five years. The reason is the NASD's reputation is at risk from unethical OTCBB trading. And the OTCBB, like the Western Canadian Stock Exchanges, will face growing competition from Cyberspace.
The NYSE wants to expand. They are considering taking the NYSE public to raise money to compete with the NASD in Cyberspace. I suspect they will be competitive bidders for the remaining American regional Stock Exchanges and the TSE. The NYSE sales pitch will stress status.
I doubt the merger of the Vancouver, Alberta and Winnipeg Stock Exchanges will work. Along with the Canadian Dealers Network in Ontario, Canada's risk capital markets will be history within the next twenty years. Also, I suspect that the Montreal Stock Exchange will disappear by 2020. The reasons for failure involve the credibility of these markets combined with increased competition from Cyberspace.
The Frankfurt (German) Stock Exchange (GSE) has a NASD vision for Europe. It sees the International (London) Stock Exchange (ISE) as the traditional market in the 21st Century. The Germans intend to consolidate everything else. The German Stock Exchange's problem is overcoming national sensibilities in Europe.
The end game for the NASD and GSE would be the merger of their networks around 2015. They would leave the NYSE and ISE as backwater "traditional markets." It will take at least an additional ten years for the NASD and GSE to merge. If it happens, it will occur after 2020.
Recent history suggests that the Asian markets will move to consolidate. The Europeans created their Union. The North Americans followed with NAFTA. The Asians were forced to create ASEAN. The American and European Stock Market integration will force Asian Stock Markets to consolidate.
The wild card in the 21st Century Stock Market Cartel plan is the Net. Several years ago, Wit Capital failed to create an online Stock Market in the United States. However, the U. S. Securities and Exchange Commission (SEC) is being forced to allow Net Stock Exchanges. At present, there are two LEGAL Net Stock Exchanges. One serves small capital investors. The other serves "after-hours" institutional traders.
In the beginning, the SEC used "Cease & Desist" orders to close down Net Stock Exchanges. Today, there are at least twenty American Net Stock Exchanges trading without the blessing of the SEC. The American Prohibition Era exemplifies the SEC's problem. They can't stop unlicensed Net Stock Exchanges, so they'll move to regulate them.
The SEC is in a quandary about regulating the Internet. The rest of the World is unlikely to try. Like online gambling, local Net Stock Exchanges create jobs in places that never heard of Wall Street.
As the established stock markets consolidate, the Net will see a proliferation of Net Stock Exchange. The hundreds of these Stock Exchanges will fragment the risk capital market. The limiting factor isn't the SEC. It's time to allow a computer-literate generation to have the disposable capital necessary to feed the dreams of the next generation of speculators. It will happen by 2010.
As the established Stock Markets consolidate and the risk capital markets fragment on the Net, nobody is looking for the Bear. We are in the midst of the greatest Bull Market in History. It's time to go public. It's time to build your company. It's time to sell your company at Market Capitalization. Then, it will be time to adopt a capital protection mode. The reason is the Bear is coming. It will probably arrive between 2010-2015. When it arrives, it will herald the worst Depression since the beginning of the Technological Revolution. The NASD & Germans will survey their empire as the Bear steps upon them.
To contact the author: Visit the Beowulf Investments website: [http://home.earthlink.net/~beowulfinvestments/] Or, visit the Global Village Investment Club Website: [http://home.earthlink.net/~beowulfinvestments/globalvillageinvestmentclubwelcome/]
He has been the Managing Director of Beowulf Investments [http://home.earthlink.net/~beowulfinvestments/] since 1981 and is the Executive Director of the Global Village Investment Club [http://home.earthlink.net/~beowulfinvestments/globalvillageinvestmentclubwelcome/]