3c hapter - Index of

Back to the Future 219
corners of the industry, suggesting a growing sense that our public
markets are failing us.
Former SEC commissioner Steve Wallman, now founder and
CEO of online brokerage fi rm FOLIOfn, believes that investors
could benefi t from a safe- haven market. “The way the marketplace
has evolved, not just with respect to capital raising but with respect
to the ability for individual investors to invest fairly, has not been
good. There is fast arising the question of whether there needs to
be two separate markets,” he says, one where professional traders
can ply their high- frequency and algorithmic trading strategies,
and one for those seeking to raise capital or invest for the long
term. “A scenario that may need to be considered, therefore, is
one in which dark pools and high- frequency trading exist as they
wish, but are kept away from the investing, as opposed to trading,
markets. That way, the public investing markets can be deployed
once again to do what they do best: provide a means for investing
where participants are engaged in reasonable price discovery and
issuers can raise capital, all for the long term.”
Meanwhile, David Weild and Edward Kim of Grant Thornton
have proposed the creation of an alternative exchange that companies
could choose to list on. This “alternative market segment,”
as they call it, would be open to all investors, and subject to all
of the usual SEC regulations. Here’s where they get really radical:
While computers would display prices, all orders would be placed
using that anachronistic communications device, the telephone.
Weild and Kim envision recreating the ecosystem of old, with
market makers, specialists, and brokers who would earn higher
commissions and spreads in return for providing traditional services
like market support, sales, and research. This, they believe,
would attract small- cap companies that are typically ignored in
today’s markets.
It seems the way forward for our capital markets might be
rooted in the past.