ions and practices…if they don’t reinvent themselves (the exchange) with what technology has brought, they run a severe risk of being out paced by markets in other parts of the world.” (National Journal, 2000). Arthur Levitt, chairman of Securities and Exchange Commission, was interviewed on this topic, where he commented that “…there is a significant risk that if existing markets do not adapt, do not change…a substantial outflow of market share to other markets, whether they be electronic, whether they be markets, in other parts of the world, (will happen). (National Journal, 2000). With this new technology that exists to increase the speed and efficiency of trading, it allows exchanges to increase in size and to benefit from potential scale economies. The new technology is able to increase the access to markets that were previously unattainable (compared to floor trading), as it greatly increases ability of access for firms to participate and reduces any need for geographical proximity to an exchange. The internet has created the largest impact upon the exchange market, as unlike the telephone, information can be constantly updated, can simultaneously offer information on bids and offers, which allows the buyers and sellers to make instantaneous transactions. (Viney, 2000). With a market that is able to have such a wealth of information available to any prospective investor, that can also provide instantaneous information of previous offers and bids, therefore increasing the liquidity of any markets that are able to do this successfully. Within the United States, Internet broking is estimated to account for about one Quarter of all retail stock trades. (Bank of England May 1999). This Internet trade, on the most part, is done at a rate less than a brokerage fee (decreasing the need for the large firms), many of who own seats at the prospective exchanges. (Applied Economics, 2000). Economies of scal...
