(December 21) – “Late one evening, sometime early in the next century, you settle into your lumbar-support leather recliner and tell your wireless voice-activated computer to sign you on to eBay, where you enter the spirited bidding for an antique Nokia cellular telephone, a slightly foxed first edition of Bridget Jones’s Diary — and 10,000 shares of United Parcel Service,” writes Diana B. Henriques in Outlook 2000, a special report from The New York Times.
Far-fetched? Maybe. But electronic technology is having such an immediate impact on American financial markets that a team of analysts at Lehman Brothers recently suggested that the stock exchange of the future might evolve not from traditional institutions like the New York Stock Exchange, but from e-commerce companies or Internet auction sites.
To be sure, that is only one very long-term possibility, the analysts said. And the evolution might work in reverse — with the Big Board transforming itself into a 24-hour Internet market that could challenge the auction sites of today.
As that speculation suggests, Wall Street is approaching the new millennium the way superstitious pilots approach the Bermuda Triangle — fearing the worst, hoping for the best but prepared for just about anything.
“The market will be constantly remaking itself,” predicted William C. Freund, director of the Pace University Center for the Study of Equity Markets in Manhattan and a former chief economist of the New York Stock Exchange. “The model of today is a scene of creative destruction.”
Regulators have tried to create an environment that will foster greater innovation and competition in stock trading. A remarkably long-lived bull market has attracted millions of new investors. But the real engine driving market change today is computer technology: cheaper, faster computers connected by high-speed communications lines and guided by innovative software.
This fast-forward evolution has given rise to a host of bargain-priced online brokerage services that, in turn, have produced an awesome increase in the amount of stock trading Americans do each day. Forrester Research estimates that the number of online brokerage accounts, which stood at roughly three million in August 1998, will reach 5.4 million by the end of this year and more than 20 million in the next four years.
Further, trading volume on Nasdaq increased 28 percent annually between 1994 and 1998, on average, while the year-to-year increase on the Big Board during that period was 23 percent, Salomon Smith Barney reported recently. That compares with average annual growth rates of roughly 19 percent on Nasdaq and 13 percent on the Big Board between 1989 and 1993.
But the same technology that has unleashed this tidal wave of fresh business has also helped Wall Street cope with that flood by fostering the birth of more than a dozen computerized trading networks, called electronic communications networks, or more often simply E.C.N.’s, where buy and sell orders can be matched in seconds. In recent months, some E.C.N.’s have started staying open for trading after the traditional stock exchanges have closed, making it even easier for investors to trade.