Shifting Gears
Imagine Toyota, the Japanese car maker adding online brokerage to its portal, Gazoo.com. What about MS2, a high tech company, handing out candy bars at a trade show with the wrappers containing warrants to buy shares in the company? One is a non-traditional competitor using the Internet to enter financial services, the other, an upstart raising capital without hiring an investment banker. Both examples defy convention and typify the kind of irreverent role reversal that is going on in financial services today because of the Internet.
And yes, they can be found in the pages of Wall Street eBusiness, a new quarterly publication devoted to covering B2B, B2C, vertical net markets, portals, community, security and a litany of other concepts and techniques invented by the Internet, that are shaking up the world of retail and institutional trading and investments.
But for capital markets, the Internet is more than hyperlinks, advertising banners and click-throughs. It's about business strategy, it's about branding, it's about customer service, it's about providing advice, protecting privacy, and it's also about the infrastructure, the platforms and the standards that glue the front and back office to the clearance and settlement process. Ultimately, the Internet is about straight-through processing, narrowing spreads and increasing volumes, and it's about complying with regulations at a time when the laws are still being written to catch up with technology.
Everyone pretty much accepts that the online investor revolution and Internet and intranet technologies are transforming the retail brokerage business as evidenced by the dynamism of E*Trade and Charles Schwab. What's less clear is what the Internet and related technologies, (i.e., extranets and intranets), will mean for wholesale financial services- B2B-investment banking, asset management, institutional sales and trading or global custody.
To illustrate the confusion, look at the manic investment trend in online bond trading systems by interdealer brokers and broker dealers that sell fixed-income instruments to institutions. See "Choices: Dealers Can No Longer Ignore Third-Party Trading Sites," p.26 Many are buying into multiple consortia like TradeWeb, Trading Edge and BrokerTec versus proprietary sites like Merrill Direct Markets or Cantor Fitzgeralds' eSpeed. But is this merely a defensive strategy geared to keeping brokers in the middle of matching buyers and sellers? Do institutions want to trade directly with dealers, or do they want to trade with each other? By contrast, CFOWeb.com is constructing a virtual finance portal for dealers of foreign exchange and fixed-income derivatives.
The linchpin of the portal strategy is community-convince buy-side portfolio managers and corporate treasurers to sign up. Community is the strategic unknown for it has to be exploited by retail brokerages and B2B sites. Professionals tend to look down upon chat rooms and message boards on Yahoo and Silicon Investor where investors and active traders share stock tips and boiler room types have been known to manipulate micro-caps. Because the securities industry is steeped in compliance and liability concerns, firms are still wrestling with the challenge posed by the Net. See "The Rules, p. 13
Yet, there are few publications that cover or understand what e-business means to the digital Street. Wall Street eBusiness is on the case- watching your competitors, and identifying the movers and shakers that are changing the rules beneath your feet.
Hope you enjoy the first issue. Let us know what you think. Ivy is Editor-at-Large for Advanced Trading and Wall Street & Technology. Ivy is responsible for writing in-depth feature articles, daily blogs and news articles with a focus on automated trading in the capital markets. As an industry expert, Ivy has reported on a myriad ... View Full Bio
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