Disintermediation of Burses with Automation Creates Better Marketplace
The NYSE really thinks it has a chance of competing with other electronic markets (see the 2nd to last paragraph on the 2nd page of this story). It would be quite interesting to take a look at the gross profit margins of the NYSE compared to ARCA. The overhead for the NYSE has got to be pretty darn high -- especially compared to the overhead for ARCA. Specifically, I am referring to the fixed costs of these two exchanges.
From my perch, it appears as though the NYSE, steeped in tradition and full of executives that don't have the first clue about how things work in a networked, digital world, is desperately trying to cling to their traditional methods while trying to pacify the public by introducing an element of automation.
To use a steel analogy: Nucor (NYSE: NUE) revolutionized the steelmaking industry. They did this by replacing real-estate and labor intensive, sprawling steel mills. Traditionally, these mills had very high direct costs. NUE came along and introduced the "mini-mill". (read about this here: http://tinyurl.com/4rylh)
By replacing unions with machines, and brownfields with squeeky-clean warehouses, NUE was able to transform the industry and move from a relatively small player in the Steel Industry to a Steel Industry giant. Innovation that creates efficiencies win in the long run. The traditionalists (read: stakeholders with the most to lose) stall and try to come up with compramise, but again, look at the Steel Industry.
CREATING EFFICIENCIES THROUGH INNOVATION IN THE CAPITAL MARKETS IS NO DIFFERENT.
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