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Stealing the Market: How the Giant Brokerage Firms, with Help from the SEC, Stole the Stock Market from Investors.

If you have never read one of Martin Mayer's books, you have not been consumed by the insider information he provides on his topics. For those who desire an understanding of the financial world, Stealing the Market . . . will certainly enlighten you as to the intricacies divulged on the securities markets and exchanges, the Securities and Exchange Commission (SEC), and the inter-relationships of shareholders, investment companies and their advisors.

Mayer transports the reader to an understanding of the particulars comprised in our stock market system. From 1950, when Mayer began investigating the markets' ideological beginning, where it (stock exchange) is thought to "represent the moral side of capitalism, for stock exchanges can operate successfully only in an atmosphere of trust and openness;" to the undermining factors that provided the impetus of the insider trader scandals, Mayer steers the reader to understand how the SEC assisted in the markets' ruination. Mayer feels that we are "in the process of losing all the advantages of the stock market system, where more and more trading is done away from the exchanges, in back alleys whence no report emerges, by players who act in their own interest, gaining the information on which they act from clients who believe they are communicating with their agents." We become aware of how the broker/dealers operate under a conflict of duties and have outmaneuvered the restrictions imposed by the SEC to seek their own fortunes.

The writing style Mayer employs is all encompassing by providing details of insignificant nature relating to the individuals involved with this story (i.e., George Gould, a "tall, still graceful man in his sixties with a long-lined oval face," or William J. Casey, "very intelligent, very devious, with attitudes formed essentially in the spy business, he was physically repulsive, a fat man with hanging jowls, and a belly lopping over his pants, watery eyes and a world-weary manner that virtually ignored the presence of the person whose questions he was answering"). While these details help the reader visualize the personalities involved, these characteristics have no bearing on the main topic except to provide amusement.

As a reader, you will learn about the changes to the stock market that have developed over the years. These changes include "the nature of the customers, the size of their orders, the compensation they offered the brokers, the source of the brokers' income, and the interfacing between the brokerage houses and the customers' world." The introduction of large-scale trading by institutional investors altered the way the market did business. Gone are the days of fixed-commissions, enter the creativity of investment houses in securing income through proprietary trading (firms trading for their own account in the same securities, at the same time, as their customers), and the introduction of soft dollars (means of paying brokerage firms for their services through commission revenue, rather than through direct payments).

Other topics Mayer provides insights into are the futures and options markets along with index arbitrage, and the sophisticated details revealed on the manipulation of them.

The evolution of technology in the stock market arena is detailed, taking the reader from the days of ticker-tape machines to computer terminals utilized in screen-based trading. Mayer provides a discussion of the various computerized systems, National Association of Securities Dealers Automated Quote (NASDAQ) system, Bloomberg (Michael) system, Instinet (a computer-based brokerage service), The Crossing Network (an improved Instinet system), and Toronto's Computer Assisted Trading System (CATS) to name a few. However, even though technology is available to provide audit trails and apparent control on all transactions, the publication identified ways the best technology has to offer, was circumvented.

The crux of the text deals with how our government has been ineffective in dealing with the deterioration of the markets. Mayer offers numerous suggestions that will solve and cure the troubling securities markets, and provides a warning of what will occur if we chose to ignore the public purposes of those markets.

I would recommend this book to business undergraduates and to others in the general business audience who wish to grasp an understanding of our stock market system. While I would not describe Stealing the Market . . . as "required reading," it certainly qualifies as "entertainment." However, wait until it becomes a paperback or take it out of your local library. Once you have completed reading it, I doubt you will want to read it again soon.

MARCIA M. VINCI Pace University
COPYRIGHT 1993 Omicron Delta Epsilon
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Copyright 1993 Gale, Cengage Learning. All rights reserved.

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Author:Vinci, Marcia M.
Publication:American Economist
Article Type:Book Review
Date:Sep 22, 1993
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