Tuesday, June 29, 1999

Can You Hear It Coming?

by Lance Ellis (lellis)

While taking a study break the other day, I flipped through the Money section of my Sunday paper. With the exception of the weekly Motley Fool article, I usually find nothing worth reading (much less writing about). This week was different. I came across an article that described how American Century Investments had purchased just under 5% of W.R. Hambrecht & Co. Despite sounding quite "financial" and boring, this is actually quite notable.

Within the article, one of American Century's fund managers described the NYSE and the Nasdaq as "middlemen" who each took a piece of the pie as they moved securities from buyer to seller. The reason this is notable is because Hambrecht operates OpenIPO, which is an Internet IPO underwriter that, instead of dividing the spoils between the Wiseguys, opens the initial offering to all interested buyers (including individuals).

The financial strength of the Internet lies within its ability to connect a diverse multitude of remote consumers. Often, this is mistaken for the ability to buy toilet paper or the latest John Grisham novel (was that redundant?) without having to go stand in line. In actuality, the Internet enables ALL owners of a certain product/service to come together with those who would seek them, at the fairest market value. Translation: Internet equals death to the "middlemen" and their pie-forks.

When a Wise financial giant like American Century begins to decry the "abuses" of an institution like the AMEX or the Nasdaq, it does not take a genius, or a Fool, to see that the Internet is changing everything from the way we buy a can of soda pop to the way we trade shares in the company that provides aluminum for the can.

Ultimately, I envision a stock exchange where, for a small fixed commission, ALL buyers and sellers come together without the market makers and their henchmen brokers. Can you hear it coming? I can.

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