V. 22:3 (17-23): DAT To The Future by David Penn
Electronic trading has come a long way in the six years since the SECís display rules of 1997. How have individual traders continued to take advantage of a revolution in access and transparency?
In many ways, the evolution of directaccess trading (DAT) is a classic David and Goliath tale. While many rightly point to the explosion in technological capability ó from PCs and the Internet to sophisticated order-routing systems exploiting intelligent networks ó the primary driver of the electronic revolution has been the efforts by the oft-abused and taken-for-granted retail trader to, quite frankly, get an even break against the powerful vested interests of Wall Street and the broader financial world.
Doubt it? Consider this excerpt from former Securities and Exchange Commission (SEC) chairman Arthur Levittís book, Take On The Street:
Beyond confirming the dealer collusion that
many had long suspected, the investigation
brought into sharp focus a basic flaw that had
developed: Nasdaq had become a two-tiered
market. One tier, the official Nasdaq dealer
network with its wide spreads, was the suckerís
market for small orders, mostly placed by
individual investors. The other tier was an ECN
[electronic communications network] called
Instinet, majority-owned by Britainís Reuters
Group PLC. Because spreads were narrower on
Instinet, it was the market of choice for mutual
funds and other institutional investors. But it
was off limits to individuals.