Central Securities Market Idea Draws Heat

FRAMINGHAM (03/03/2000) - Brokers clashed with the heads of the nation's biggest stock exchanges in a heated discussion over the future of the U.S. securities marketplace at a government hearing this week at the World Trade Center in New York.

What's at stake is a proposal to create a central limit order book where all U.S. stock buyers and sellers would meet electronically. There are now a number of competing stock exchanges, including the New York Stock Exchange (NYSE) and the Nasdaq Stock Market.

A centralized structure would benefit the major brokers, which already route a high volume of their transactions to so-called electronic communications networks. But such a move could hurt small brokerages and discount firms because they would likely have to raise their fees.

Meanwhile, the NYSE and Nasdaq reportedly have discussed merging to preserve a central role at a time of increasing competition from electronic markets, but a Nasdaq spokesman said Friday that no negotiations or deals are imminent.

Testifying before five members of the Senate Banking Committee, CEOs from four major U.S. securities firms argued for a more centralized market structure.

The heads of the NYSE, Nasdaq and broker Charles Schwab Corp. argued against what they called a "monolithic" stock exchange structure.

But other brokers, including the heads of Morgan Stanley Dean Witter & Co., Goldman, Sachs & Co. and Credit Suisse First Boston, all argued against what they called the fragmentation of the marketplace.

Dana Stiffler, an analyst at Meridien Research Inc. in Newton, Mass., said that althougha central clearinghouse might give investors slightly better prices, it would increase costs for discount brokers such as Schwab, which keep prices low by keeping trades in-house.

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