From: tcmay@got.net (Timothy C. May)
Date: Tue, 16 Jul 1996 10:25:40 +0800
To: "Vladimir Z. Nuri" <vznuri@netcom.com>
Subject: Re: brokers as middlemen
Message-ID: <ae0fd46309021004509f@[205.199.118.202]>
MIME-Version: 1.0
Content-Type: text/plain


At 5:48 PM 7/15/96, L. Detweiler wrote:

>this reminds me of something else. the stock exchange as it now stands
>is not the paradigm of true capitalism as some would have others
>believe. in fact I see it as the paradigm of what might be called
>"middleman capitalism", a version of capitalism that is rapidly
>diminishing and disappearing in the onslaught of the information age.
>
>essentially, in the new version of capitalism, middlemen who do not
>*add*value* to the delivery of a product are going to be increasingly
>cut out of the loop. I am not saying *all* middlemen will be cut out,
>but many that now exist will be.

I agree with Vlad/Larry's points, and this is in one of the other
recommendations for the NASDAQ, that it be even further
electronic-mediated, with more information made available on bid/ask
spreads.

The rise of discount brokers, who provide essentially no advice to
customers, is part of this "disintermediation." Ditto for electronic
trading systems, such as Accu-Trade.

>in my opinion, the *stock*broker* as his job is now defined is in many
>ways the classic middleman that does not necessarily add value to the
>information that flows through his hands. if he is just an agent for
>carrying out the demands of clients, then I'd say that this role is
>going to disappear as markets become more automated, or rather capital
>moves toward stock exchanges that diminish this overhead. however, there
>are many brokers that add far many more services than mere
>blind investor response, such as analyzing company profitability,
>forecasting, etc-- these are adding value imho.

Agreed, and this is already happening.

>I think the end result of the information age is going to be something
>that could be regarded as the ultimate capitalist market-- something
>that eliminates all "unnecessary" middlemen. I suspect the stock exchanges
>of the future will *not* be regulated because they *cannot* be. it
>will be a matter of buyers and sellers choosing the systems that
>best suit them regardless of what governments feel is appropriate, fair,
>or whatever.

I emphatically agree! There is little need for regulation in this new
environment, and "reputations matter." And regulation is becoming
problematic.

(To cite one example. Some are calling for registration and regulation of
"investment advice," which is largely unregulated in the U.S. today. That
is, I can self-publish a newsletter, "Tim's Stock Picks," and the First
Amendment says this can't be restricted (Caveat: But I can't sell "Tim's
Legal Advice," "Tim's Earthquake Safety Advice," or "Tim's Medical Advice"
to clients...go figure). Some want investment newsletter writers "held
accountable." Great, so I'll move my newsletter to Anguilla or Monaco. What
do they do then? Stop U.S. subscribers from getting them? Set up postal
stings, where illegal investment or medical advice is treated as illegal
child porn from Denmark? Use key escrow to monitor received Net traffic?)

>its interesting how the restrictions on stock buying and selling are
>becoming quite orwellian in the way they are designed to limit
>mere information transfer in many cases, it seems. TCM has written
>about this far better than I could in previous posts. ("inside trading"
>restrictions).

Again, I agree. I won't quote anymore of Vlad/Larry's piece, as I agree
with it all.

(Vznuri should probably "reclaim" his Detweiler personna, so that such good
messages as these accrue to his True Name's reputation.)

--Tim May

Boycott "Big Brother Inside" software!
We got computers, we're tapping phone lines, we know that that ain't allowed.
---------:---------:---------:---------:---------:---------:---------:----
Timothy C. May              | Crypto Anarchy: encryption, digital money,
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