Problems Concerning On-Line Trading
Policy Paper

Ben Cipiti

ISSUE DEFINITION:

As the Internet has grown considerably in the past few years, it has been heralded because of its ease and convenience. Just as more and more businesses have turned towards the Internet because of the huge consumer population which may be reached, brokerage firms have also tapped into this area of the market recently. The ability to trade stocks on-line sounds great at first, but there are problems underlying that may or may not need to be addressed.

Anyone who is familiar with the Internet knows how frustrating it can be when it takes a long time to load a web page or when a server is inaccessible temporarily. It can be annoying, but usually it is not a big deal. However, if someone trades on-line and needs to buy or sell due to a change in the market, these kinds of problems can be the difference between a great deal of money. Log-jams and slowdowns associated with on-line brokerage firms have been the cause for many complaints recently.

Because the Internet is so available today, just about anyone can get on-line. It is also very easy to start an on-line account with a brokerage firm. Perhaps there are some people who trade on-line who do not really have the experience required. It can be very easy to lose money when someone does not know what they are doing.

A new type of trading which has been a hot issue in the news lately is what is called "day trading." It is not really investing at all, but rather making money from minute fluctuations in the price of a stock. Day trading is only possible because of the Internet and, more specifically, the faster connections available today. By keeping track of stock prices continuously with fast connections, day traders spot small differences in buying and selling prices of the same stock and take advantage of them. Again, it is very easy to lose a lot of money quickly with day trading. Some day trading firms have gotten in trouble for false advertising by making it look easier than it is.

Should there be more regulation concerning on-line trading? Should the government have more control over on-line brokerage firms? This paper addresses the problems introduced above, why they are becoming important today, and what specifically causes them. It will then attempt to find some possible solutions to these problems.

The issue is very important since the stock market plays such an important force in our world. There is plenty of history to show how the stock market can seriously affect our very livelihoods. It is also important because it concerns regulation of the Internet in general which itself is a very controversial topic. The Internet has been known as the purest from of Democracy, yet regulation could change all of that.


BACKGROUND:

In the past year on-line trading has doubled, now accounting for about 25% of all retail stock trades (Oppel, R. A., January 25, 1999). 6.5 million people have on-line brokerage accounts which is up from 3.2 million one year ago. About one hundred companies now offer on-line trading which is again twice the number from one year ago (Schroeder, M., January 4, 1999). The problem with this growth rate is that the companies cannot always keep up.

One example is the company E*Trade. On October 27th and 28th, 1997, customers were unable to access their accounts due to a high volume of trade from volatility in the market at that time. Changes in the market caused as many as 10,000 people to get on-line to buy or sell their stocks. There were not enough servers to keep up, and customers could not get in. This led to a class-action lawsuit which was filed against the company. Afterwards, they increased their technology budget by $20 million and increased capacity to 150,000 (Schroeder, M., January 4, 1999).

Unfortunately those changes did not last too long before more problems occurred. In the beginning of February of this year, two more class-action lawsuits were filed against E*Trade. The first lawsuit, Cooper vs. E*Trade Group Inc., seeks damages on behalf of all individuals who have or had accounts from September, 1996 to the present. The complaint was filed because of false or misleading representations of accounts as well as inadequate trading systems in meeting customer demand. The other lawsuit seeks class-action status for any customer affected by system breakdowns which occurred the week before (Hines, M., February 10, 1999).

For three consecutive days, E*Trade experienced slowdowns which the firm blamed upon a software glitch. In a Yahoo financial discussion area, one visitor stated, "E*Trade has literally cost me thousands of dollars. It has been taking over two hours to get a trade confirmation, and this past week, there have been times when it takes me over an hour to log on." (Hines, M., February 10, 1999)

Another company, Ameritrade Holding Corp., shut down for forty-five minutes one day and twenty-five minutes another day last September due to market volatility (Rasmussen, September 11, 1998). It may not seem like a long time, but the way the stock market can change so suddenly makes it a problem. Ameritrade also had problems the same time in February that E*Trade was slowing down (Hines, M., February 10, 1999).

As of September of last year, the complaints due to on-line trading grew by 330% from the previous year to 1,114. The top three complaints were that orders were processed slowly or not at all, that accessing accounts was difficult, and that errors were made in order processing (Machlis, S., February 8, 1998). One investor decided to buy a hot new Internet stock, Theglobe.com, thinking it would run between $15 and $25 a share. He bought 2300 shares and found out later that he paid $90 a share and spent about $150,000 more than he expected. If stock prices are not updated continuously, what is seen on the screen may not be the current price. This is an extreme example, but it is very possible with the rapidly fluctuating technology stocks or Internet stocks today (Lebaton, S., January 28, 1999).

Another investor tried to sell thirty shares of a stock. He received no confirmation of the sell, so he tried to sell again. He ended up selling sixty shares, twice as many as he had. A third investor put an order in soon after which he canceled. He received a confirmation that the cancel had been received, but the order went through anyway. These kinds of problems usually occur when there are slowdowns in service (Lebaton, S., January 28, 1999).

Occasionally an on-line firm will reimburse a customer with a complaint that caused them to lose money, but in the majority of cases this does not happen. Company policies vary greatly from one to the next, and factors like how much of a valued customer they are have a big influence (Lebaton, S., January 28, 1999).

These are the more technical problems with trading over the Internet that can lead to the loss of a great deal of money, but there are also problems due to misled or misinformed people. Some of these problems are not even deliberate but stem from the nature of the Internet itself.

Because it is so easy to jump on the Internet, and because it is convenient, on-line trading is easily brought to the average person. Brokerage firms love this because it will bring in a larger consumer base, but many of these new people probably do not have the experience to trade in the stock market. Web sites can be very flashy. Since trading is easy, people associate that with making money easily. This simple fact is that it is still trading in the stock market.

Another big target of investigation have been the day trading firms. The day trading industry began about three years ago when advances in computer software allowed for on-line trading which takes seconds. Also, federal regulators changed the trading rules to allow small investors to bid against professional traders (Deener, B., December 16, 1998).

A day trader may see a certain stock that one person wants to buy and that another person wants to sell. They look for small differences in price. They try to find a pair such that the person who wants to buy will pay slightly more than the person who wants to sell. Then, the day trader will quickly buy from the one and sell to the other in a matter of a minute or two. They typically make between $30 and $80 on a transaction if they are successful, but they make up for that small profit with volume. A typical person with an on-line account may only make twenty-five transactions a year, but a day trader can make between fifty and two hundred transactions a day. They are known as day traders because they never hold on to a stock overnight (Walls, N., October 19, 1998).

Because day traders are looking for fluctuations in price, they are drawn towards the technology stocks which change rapidly. The estimates of the number of day traders around the country range from 2,000 to 20,000 at any one time, but they account for about 25% of all on-line trades. They add significantly to the problems like slowdowns during heavy periods because that is when they are more active. Nasdaq has created a task force to study how much day trading affects volatile stocks (Reed, T., December 14, 1998).

Day trading may sound easy, but it is actually very hard. A day trader typically is very good with computers and has had experience in the stock market previously. They also usually have a good amount of money to start with. About one third of day-traders make money, another third break even, and the other third lose money. Probably only one in ten can actually support a family from day-trading (Walls, N., October 19, 1998). Unfortunately, some day-trading companies have made it sound much better than that in their advertising and promotions.

On-Line Investment Services, Inc. of Massachusetts was closed down in the middle of January of this year due to deceptive marketing. A nurse who opened an account with the company was an unsophisticated investor and let a friend conduct the trades for her. In a five month period, the nurse made $39,733, but the firm made $190,000. This is because of the way on-line investment firms work. They charge a commission for each transaction that is made. It may be anywhere from $10 to $25. Since day trading does not involve making much more than that on each transaction, most of the profit goes to the firm (Boston Globe, January 15, 1999).

Since October, Massachusetts has taken action against three other day trading firms due to misleading or misinforming the customer. Regulators filed a cease-and-desist order against Block Trading Inc. due to fraud and an unlawful loan scheme. Another company, Bright Trading Inc. failed to register with the securities division. All-Tech Investment Group got in trouble for deceptive marketing and creating fictitious accounts (Boston Globe, January 15, 1999).

Some regulators are not too fond of these day trading firms. Many of the firms offer classes which can be $1,000 to $2,000 to learn how to day trade. Then, they also charge the commissions on each trade. Phillip Feigin, the new executive director of the North American Securities Administrations Association said, "I’d worry about somebody who was mining gold and is now selling maps to the mine. If they were making so much money, why were they teaching you?" (Walls, N. October 19, 1998)


KEY CONFLICTS & CONCERNS:

Probably the biggest reason behind the log-jams and slowdowns that have occurred in the past is that on-line companies traditionally advertise first and worry about the connections later. This is true with any on-line business. Companies will spend millions of dollars on advertisement. There is not much money left to make sure there are enough servers ready. This is one of the biggest conflicts associated with these kinds of problems.

Advertisement is very important for new companies on the Internet. Today there is more and more competition, and that only means that more money is spent on advertisement. There is no way of knowing whether a company will be a success or not until the servers get overloaded and the company has to expand. Ameritrade which began in September, 1997 spent $25 million in advertising in that quarter. E*Trade may have spent as much as $80 million on marketing in the second half of 1998. In the next twelve to eighteen months, they plan on spending $150 million to promote their new Destination E*Trade web site (Schroeder, M., January 4, 1999).

After spending millions on advertisement, a company plans on attracting attention which brings the money in. It will be able to keep up with moderate growth by increasing the number of connections and server capability, but there is no way to keep up with the almost exponential growth rates associated with the Internet. Slowdowns or shutdowns will inevitably occur, and it may take a while to fix the problems. By that time, complaints have already poured in, and the company’s reputation can easily be hurt.

It is interesting that the companies cause this conflict themselves, but this is why is will be hard to resolve. Businesses have to advertise to be successful and make money, and the more they can spend, the better. They are not going to want to give some of this money up in order to make their on-line systems able to handle the demand put on them for only a few times each year.

Especially with the day trading firms, a second major conflict is the need to bring in the customers versus adequately explaining the services offered and how everything works. Companies need to advertise to attract the consumer, but it is hard to distinguish between flashy advertisement and false advertisement.

This is a hard conflict to deal with because most brokerage firms do explain the risk, but if it is all contained on a web page, it is easy to skip past it. When using the Internet, it is easy to jump ahead through the pages without reading all of them. The question is whether the company should be responsible for presenting all of the information in a way that they are sure the customer will see it.

Misreading information or missing something important probably occurs many times over the Internet in other companies. It is easy to press the wrong button or be in the wrong area, but it is such an issue with trading on-line because it can involve the loss of a lot of money usually. This does not make people too happy.

One company, eBay Inc., was hit with a surprise when the New York City Department of Consumer Affairs launched an investigation for fraudulent trading. They had been doing great as a business. Supposedly eBay gets complaints on twenty-seven out of every million transactions. This is a very small percentage, and the outcome of the investigation is not known yet (Rogers, A., February 8, 1999). Fraudulent trading or misleading information is hard to deal with because of how spread out the Internet is. It will be hard to keep track of on-line brokerage companies, and even then, there are so many gray areas in these regards that it will be hard to say for certain if a company did something wrong or not.

In the past, someone could easily call up a brokerage firm and start an account, but if they were new to the stock market, intimidation might keep them from getting involved. They would have to speak with someone at some point. The Internet, however, changes that. It allows for a more anonymous way to conduct any kind of business. That intimidation of the past probably was good to keep inexperienced people from losing a lot of money.

This is a third conflict. The technology of the Internet makes everything so easy, but sometimes it is better if everything is not so convenient. This is also true in the web pages themselves. When all it takes is a click of a button to execute a trade, it is no wonder there may be complaints every so often. If there is not any kind of check in place, it becomes too easy to spend money. The issue here is that the one thing that the Internet is known for, its convenience, could be the cause for problems. How should a problem like this be fixed when it is due to the nature of the Internet itself?

Another concern important to these problems is that the Internet is a very young innovation. There are still a lot of kinks that have not been worked out yet. Companies that go on-line simply do not have a great deal of experience with business on the Internet. The hardware and software behind them do not always work perfectly. CEO David Pottruck of Charles Schwab & Company said, "We are all in a learning mode. As we learn we are all going to get better." (Schwartz, J., February 24, 1999)

Schwab has been a leader in on-line brokerage firms, but they had an outage of their site due to their transition to a new mainframe. There was a software problem. Even if the system capacity is okay, there can always be random computer problems like these (Schwartz, J., February 24, 1999). There is no way to police these problems. They are just going to happen, and unfortunately it may affect a few people from time to time.

Finally, a concern relevant to this issue which has risen in the market since the Internet became so widespread is the rapidly fluctuating technology stocks. These stocks are usually related to the Internet. Because on-line companies have been known to grow very fast in the past, these new stocks are very hot items in the stock market. As soon as investors hear of a new Internet stock, they rush to buy, and prices will soar. Soon it is realized that these prices are way too high, and the stock plunges. This frenzy adds significantly to the problems of slowdowns and bottlenecks with on-line trading.

One specific example is the company Active Apparel Group which announced its debut on the Internet last Christmas. The Web site was not even up and running when the first bids went up to $25 a share—it started out at $1.25 a share. This jump was in the period of a couple of days. A few days later the price plunged to the single digits where it has been since. This is typical of Internet stocks, and the frenzy associated with them can be bad (Wyatt, E., February 16, 1999).

It was mentioned earlier that day traders thrive on these kinds of stocks. Since they jump around so fast, there are always going to be fluctuations in price from one investor to the next. When day traders rush in to buy and sell quickly they may only add to the frenzy. This in turn can be the cause for the slowdowns that can occur.

These problems have attracted quite a bit of attention from Nasdaq. The chairman of the National Association of Securities Dealers, Frank G. Zarb, warned the industry about the dangers of on-line trading. He felt that the frenzy for trading over the Internet may be creating an increasingly risky environment for investors which could undermine public confidence. He also thought that too many small investors were naively trading Internet stocks in hopes of receiving fast profits (Barboza, D., February 10, 1999).

In addition, N.A.S.D. members were worried about customers being allowed to borrow money to trade risky stocks. They also cautioned brokerage firms about advertisements creating false expectations about making money. Day trading firms were cautioned about urging customers to speculate aggressively to make more profit quickly. Mr. Zarb said, "Today’s conditions suggest an increased responsibility for regulators—for us and for state and Federal authorities—to be extra vigilant, but nothing can help more than investor education." (Barboza, D., February 10, 1999)


POLICY ALTERNATIVES:

One possible solution to the problems involved would be the creation of a regulatory committee for on-line trading. It would be best if the committee were a part of the Securities and Exchange Commission. This committee would be responsible for checking the practices of on-line brokerage firms.

There are a few different areas which need to be addressed. First, brokerage firms should limit the number of accounts they have depending on the maximum number of people the servers can support at any one time. Perhaps the number of accounts could not reach higher than double the maximum capacity. This way 50% of the people who hold accounts could execute trades at the same time. The regulatory committee would make sure no company violated this rule, and the penalty would be a fine or a mandate to build more connections. The company Datek Online Holdings Corp. has gotten high marks in the industry for prompt order handling. They stay on top of things. Last November they increased capacity five-fold. In March, capacity is expected to be boosted twelve times (Machlis, S., February 8, 1999). If regulation caused all on-line firms to keep up like this, the problems would quickly go away.

Second, every on-line brokerage firm should have what is known as limit buying or selling. Some firms already have this. It basically means that when someone wishes to buy or sell stock, they have to input a maximum or minimum price they will accept respectively. The transaction will not take place unless a limit is entered. This keeps anyone from accidentally spending more than they have or selling at a price they do not agree with.

Finally, the regulatory committee should be responsible for making sure the companies are following ethical advertising practices. They need to be sure the average person knows what they are getting into when they join the particular on-line brokerage firm. This can simply be done by reading all of the web pages and walking through the joining process. The committee should have the power to force the company to modify their page or their processes if needed.

This idea of government regulation would be a very bold step. There would be many obstacles in the way. It would cost money to create a completely new division of the Securities and Exchange Commission. This money would probably come from taxes. The companies will strongly protest because it leaves them without as much flexibility. Also, people might not even like the idea of Internet regulation in the first place.

The good thing is that it would fix the problems. The slowdowns should stop, and the people would be better informed. Also, since there are only about one hundred firms today, that is a very realistic number to handle. It may just be hard to keep up with the growth.

The hardest thing to regulate would be making sure the companies were following ethical business practices and fully informing the consumer of the risks involved. It will be very subjective to say what crosses the line of being misleading. Maybe the best way to handle this would be to set up a basic format or process the company must follow when setting up a new account for someone. A new customer should have to be a part of some kind of on-line education about company policy and the risks involved with Internet trading. This would make regulation easier.

Another solution is currently being proposed by Nasdaq. The National Association of Securities Dealers has requested from Nasdaq regulators that they test trading halts for unstable stocks. The plan is to test trading halts for a year to see how it would work. The idea is that by stopping the trade of a stock which is bouncing around a great deal, it will give the market a chance to calm down and reevaluate the stock’s price. Most of the stocks that this would affect would be the volatile technology stocks (Oppel, R. A., Februsry 15, 1999).

The plan would allow Nasdaq to stop the trading of stocks "when there appears to be significant corporate news or when a company’s security is experiencing extraordinary volatility, either of which is impacting the fairness and orderliness of the market." (Oppel, R. A., Februsry 15, 1999) These trading halts have worked in the New York Stock Exchange, but the opposition argues that it will only make the problem worse as investors will rush to buy or sell before the halt goes into effect.

Many on-line firms do this to a certain extent already within their accounts. The company Waterhouse Securities Inc. required investors to trade very volatile stocks over the phone instead of on-line. They have prohibited the on-line trading of ten stocks including Amazon.com and Yahoo.com. In addition, Waterhouse prohibited margin borrowing with those same ten stocks. Margin borrowing is used when you do not have to have all the money to buy a certain number of stocks. The company may only require a percentage because most stocks do not change much, and the company knows it will get its money back. However, volatile stocks can change considerably, so Waterhouse does not allow margin borrowing in those cases. This helps them and prevents some trades from occurring (Oppel, R. A., January 15, 1999).

Maybe the Securities and Exchange Commission needs to just prohibit the on-line trading of certain volatile stocks. This would certainly help the problems with logjams and slowdowns, and it would probably help a lot of people from making a mistake and losing a lot of money in a trade.

If the Securities and Exchange Commission tested a combination of halting on-line trading and trading in general of certain stocks, it could help many of the problems. It has been done in the past, so there should not be too much of an issue with the on-line brokerage firms. It also probably would not cost a great deal. The cost might just be the addition of a few new people in the Securities and Exchange Commission to figure out what to halt and when to halt it. The part of the population that would be the most affected would be the day traders. Since they thrive on volatile stocks, most of their business would be in halts.

This solution will do nothing for the problem of misleading advertisement, but it could keep inexperienced investors from losing money on-line by trading the hot Internet stocks. Because it will help the slowdowns, it seems like a very feasible solution, and it may be the first step in regulation that might be needed in the future. Usually large changes do not go over very well, but small steps over the years are gradual and more easily supported.

Another idea which has also been proposed before is to extend the time that market makers have to post prices before an initial public offering begins trading. It was proposed by a Nasdaq committee of market makers, brokerage firms, and other industry officials which met to address the issue of the recent volatility in the Internet (Oppel, R. A., January 25, 1999). This means that a price for a stock will be posted for a while before anything can happen. By increasing the time, the entire market has a better chance of seeing the changes taking place. This will allow for more fair and realistic trading prices.

The advantages to this solution are that it can easily be done by the Securities and Exchange Commission. It would not really cost any money. Most investors probably would not have a problem with it because it will make the trading more fair. The biggest complaint would be from day trading firms again because even volatile stocks would calm down, and the day traders would not make as much money.

The question here is how well it will solve the problem of too many people trading on-line. It may make the trading more fair which will calm the market somewhat, but this does not directly solve the problems with Internet slowdowns. There still can be problems with servers, and it does not address the issue of misleading advertisement.

The very last alternative is not to do anything at all. The Internet is still very young. We do not know how it is going to develop in the next five or ten years. It is very possible that the problems will go away or fix themselves as time goes on. There are two reasons for this.

First, new technologies and new types of connections to the Internet may dramatically solve the slowdowns which occur. It certainly is not something to count on, but it may just be better to wait.

Second, the problems may be solved simply by competition in the industry. There is a great deal of competition for on-line trading already, and it will only grow in the future. The companies which cannot handle the demand their customers put on them will inevitably fold as they lose reputation. Those companies which stay ahead of the growth will succeed and push the others out. When Ameritrade had problems, the company’s CEO stated, "It has been a multi-million dollar fiasco. It has caused us some bad publicity. After we get it fixed, we’re going to have to spend many millions more to fix our image." (Rasmussen, J., September 11, 1998) Also, as time goes on the companies will gain more experience in on-line trading and what works for them.

The Internet has been said to spread stock trading away from the elite few that it has been in the past to a larger public. Traditional investors of the past tended to be rational and patient, but the frenzy of the stock market today is being blamed on the new on-line trading. When investors hear of a new Internet stock and quickly try to buy, it is known as herd behavior because everyone jumps in, and as more and more people jump in, the prices rise more. This herd behavior is blamed for the problems today (Suroweicki, J. December 21, 1998).

Actually, though, as more and more people get involved with the stock market, there is less chance for profit. Any mispricing will be instantly recognized and taken advantage of. This makes the market more efficient, and the "right" price is more likely to come up. Day traders in effect make the market more efficient by taking advantage of small differences in price. They are destroying their way of making money as they make money (Suroweicki, J. December 21, 1998).

These problems are probably better blamed on the age of the market in regards to Internet stocks. There are always fluctuations at first with a new company because no one is sure where the pricing should be. With age, the swings will become more moderate. Also, as the Internet companies go back to the market to offer more shares, prices will decline (Suroweicki, J. December 21, 1998).

To not do anything is not really a solution, but it has its advantages. The Internet can stay free of regulation, and the firms would like that very much. The disadvantage of course is that it does not immediately solve any problems. In five or ten years the issues may go away, but that still means five or ten years of complaints.


CONCLUSION:

Regulation of on-line trading is important because of the growth rate it has seen in the past year especially. Increasingly more and more investors trade on-line, and the complaints have increased even more so. Various organizations like the Securities and Exchange Commission and the National Association of Securities Dealers are well aware of the issues of slowdowns and misleading advertisement and are studying what can be done.

Regulating the Internet is something that it seems many people are leery about, but it may be a necessary evil if anything is going to be done. I believe that regulation is going to have to take place in small steps, though. No one reacts well to sudden changes.

As a result, my recommendation is a combination of two of the policy alternatives described above. The first is the implication of trading halts in the stock market. The second is extending the time that market makers have to post prices before an initial public offering begins trading. These would both be the responsibility of the Securities and Exchange Commission.

Whenever a specific Internet stock starts to fluctuate wildly or is expected to bounce around, trading could be halted for that stock for a specific amount of time. It would have to be long enough for the market to calm down, and it would not work at all if in that time something drastic like bankruptcy occurred. If the entire situation is not monitored closely, there could be even more activity when the halt is lifted than if it had never been enacted. This could place an enormous responsibility on the Securities and Exchange Commission, but it has been successful in the past.

This will dramatically reduce the complaints due to servers getting backed up because investors will not be able to trade the volatile stocks. Since the hot Internet stocks are generally the ones that inexperienced investors like to trade, this will also prevent many people from losing a lot of money.

By increasing the amount of time between posting prices and trading, the market will have more time to adjust and figure out what a stock is doing. This should decrease the fluctuations that occur thus decreasing the amount of activity. This, working with the trading halts can effectively keep too many people from trading on-line at one time.

I think that people in general are the most upset over the halts and the problems associated with them like not getting confirmations on trades. That is why this solution is good. It solves the problem without interfering too much. It will be a small step in regulation which may be needed in the future. Its advantage is also in cost. It should not cost anything to enact these two regulations. It may require more attention to be paid to specific stocks by the Securities and Exchange Commission, but other than that it will be mostly cost-free.

While the average investor and brokerage firms probably will not have any qualms over this, the biggest complaint will come from the day traders. Trading halts of volatile stocks and increasing the posting time will really hurt their business as these are the things they normally thrive on. They will be very upset at these changes, but I think that the fact that there are so few compared the entire market makes them not as important. It would be better to find the solution to help the majority. In addition, although this is not good as it means people losing their jobs, a decrease in the number of day traders will also help alleviate problems with Internet slowdowns.

The topic that is not covered by this solution is the issue of misinformed or mislead people. I believe that it will be too hard to monitor the activity of every on-line brokerage firm and make sure they are being ethical. There is so much gray area that it will be hard to distinguish between what is okay and what is wrong.

I think that these problems will solve themselves in time as the public becomes more accustomed to the Internet and the risk involved. Companies that make too many people mad will face lawsuits, and that will seriously effect their reputation. With all of the competition out there, those kinds of brokerage firms will quickly go out of business.

After researching what I found, I strongly believe that something needs to be done. I believe in this solution because it is not very invasive, not very costly, and it will solve two of the problems directly. It also represents two issues which have been brought up by the Securities and Exchange Commission and a Nasdaq committee. Perhaps there will be more problems in the future, but at least this will be a stepping stone to the further regulation which someday may be called for.


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This page was last revised on March 7, 1999 by Ben Cipiti. Please send comments on, or suggestions for, this web page to bc912196@oak.cats.ohiou.edu