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The Internet is such a vast field that we have three related pages addressing this subject.
Our Internet Investments Page keeps track of indexes for Internet companies and tries to help you find high-tech companies which are worthy of investment. When almost all the companies you are looking at are losing money, how do you find a sound investment? Or can you? The old rules are gone. We hope the links on our Internet Indvesting page help you to draft some new rules.
This Cyber-Exchanges Page tracks the new technical developments in on-line investing. With the rise of ECNs we have seen new stock exchanges and consolidation of old exchanges around the world. There is increased global investing. Day trading (for better or for worse) has already changed investment patterns. Soon, 24-hour trading will shake up the investment community even more. This page tries to keep abreast of developments.
For a summary of many current issues, such as Dark Pools (summarized below), read the leading magazines for stock brokers such as: Advanced Trading, On Wall Street and Traders Magazine
MOST RECENT FINANCIAL INNOVATIONS DUE TO THE INTERNET |
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Nobody yet knows all the business changes which will come about due to the Internet, but the financial world is already seeing some unexpected innovations.
Play Money and Play Assets have been used for many generations in board games and now in online gaming. Today exchanges have sprung up where you can buy or trade virtual assets and money or even buy them for real cash. This has long-term implications. For example, bright gamers in less affluent countries are making a profit by selling their virtual gold and other assets to relatively rich US gamers for dollars. In addition some services offered in online worlds, paid for with virtual money, can have real world value. Since the virtual money can now be turned into real coins, what are the implications when it comes to income tax? At some point virtual money will become a big enough industry to attract government scrutiny. If you want to read more, Terra Nova is a foremost source of information on the virtual economy.
Several innovative Internet sites attempted to set up "alternative" trading sites but never fully launched, ran afoul of SEC regulations, or simply gave up. (See " INVESTOR BULLETIN BOARDS" and " EXCHANGE-TYPE SITES", farther down this page.) They may have simply been squeezed out by the ECNs and ATSs which made sort of an end-run around the system and were, indeed, successful. The ECNs and ATSs did not attempt to enroll companies in any kind of market or exchange, they simply concentrated on expediting trades involving companies which were already listed somewhere else.
In December 1998 new SEC rulings allowed for the creation of a new type of exchange. The SEC's term for a stock trading system where investors trade directly with each other is an "Electronic Communications Network".
As of 2004 the NASDAQ is a fully electronic exchange and the NYSE is making large changes to also become fully electronic.
The first big players to enter the game were (and still are):
All ECNs are ATSs, but not all ATSs are ECNs. ATS is a broader term. For example, if a broker/dealer is operating a trading system which clients or other broker-dealers may also use, this might be an ATS. The following companies call themselves an ATS:
ECNs and ATSs allow for 24-hour trading. They may help you avoid brokers fees. However, as a New York Times article pointed out, ECNs also fragment the market perhaps causing you to wind up with an inferior price. We'll see rapid, big changes in the way the world trades due to ECNs and ATSs.
The Securities Operations Forum offers a very good article, ECN and ATS...The Electronic Future which helps to define these terms and summarizes recent and upcoming changes in the way we trade.
For late-breaking, ongoing news on ECN's and online trading systems, the best source we've found is Trader Bulletin followed closely by Traders Magazine.
Read these articles on developments in after-hours trading from:
And here are some sites that specialize in After-Hours Trading.
A legal alternative to running a "market". is to sell software that helps a public company set up their own bulletin board system. In a release Jan. 26, 1998 Internet Capital Exchange says, "While we finally received a SEC no-action letter before Christmas we had already embarked on the path to take our software components and release them as products that can be integrated into any corporate web site.... Recognizing that basically the SEC will allow an individual corporate issuer to manage their own bulletin board trading system on their own web site but not let an independent party do it as a 'service'.". [Our] thoughts are that these products should dramatically lower the barriers to having small companies perform their IPOs as well as perform bulletin board trading.
As for being able to sell space on one site where the BBSs are organized, it takes much time and effort to get approval by the SEC. After years of red tape "The People's Stock Network" won permission in December 1997. In 1998 2 more trading systems followed. However, as of 2002 most of these sites had disappeared. The remaining ones are:
When is a stock exchange not a stock exchange but a bulletin board or something else? The world is changing so quickly that new terms will undoubtedly be created. At one time we had a long list, here, of many innovative sites still under construction or awaiting SEC approval. Soon, some had run afoul of SEC regulations. As of 2004 only the Cuban Stock Exchange was still left and we moved it to the regular stock exhanges page.
Pre-IPO investment has become so big on the Web that we have devoted an entire separate page to it. We predict that, frustrted by the inability to get a share of Internet IPO's, investors will turn to the new breed of publicly traded BDCs & Venture Capital Funds!
