In "Evolution of the Exchange" [Business, Dec. 5], Sandra Sugawara quoted Gerald D. Putnam, founder of Archipelago, an emerging electronic communications network: "I wake up every morning believing [my vision] is possible." It isn't.
Mr. Putnam's fantasy is that he can compete with Big Board specialists by making competitive bids and offers on stocks over a computerized network called an electronic communications network. He can't.
I have traded professionally for 30 years, and I have never witnessed a bull market that didn't embolden ambitious fools and innovative geniuses alike. Buying a stock at the opening and selling it a minute later at a profit is seductive. However, the "art" of flipping IPOs for 100 percent returns eventually will give way to reality. Some day, "market makers" using computers will be asked to buy stocks in a market that may descend for weeks or months. At that moment, these dilettantes will either have to take a risk or turn off their machines. For proof, ask the NASDAQ how many troubles erupt when the market declines, even briefly.
The irony here is in the almost-frenzied rush to change a revered system that has taken America to the pinnacle of wealth and prosperity. The small decoys like Mr. Putnam won't have a chance, and the supposed "savings" for investors are destined for big brokers' pockets.
As I write, the Wall Street Journal reports that seven of the largest options-trading firms on Wall Street are planning something called the International Securities Exchange. These brokers see their chance to dismantle the exchange system that is user-friendly but costly. Using the "digital revolution" as a password to fatter profits, these large firms are blinding regulators with promises of "more competitive markets."
Investors will not benefit from "a more competitive market" held together by the Internet. But as always, someone will. Remember, a computer can facilitate a trade, but only a human can make a market.
STEVEN F. SCHWARTZ