The electronic markets for financial instruments is no different than any other industry where automation and competition ultimately match and overwhelm advantages from quality, features, longterm relationships, specialized knowledge, locality, or anything else and leaving price as the primary competition. Any advantages gained by redefining the product space through R&D to create a new class of product or to subsume an existing one is soon lost as remaining competitors follow suit.

For a while consumers benefit as high-quality products are available at low prices from fewer suppliers needing much fewer employees. The products last longer and likely cost more to repair than to replace. Gone are TV repairment, most auto service stations that fixed tires and made repairs, and much more.

Any product or transaction that can be delivered electronically over the net will quickly loses its perceived value -- music, video, software, financial transactions, newspapers -- the resulting changes happening even faster.

Once there remain just a few suppliers with tiny margins depending on volume to meeting their fixed costs, then any significant disruptions to their volume are fatal, probably to all remaining suppliers because the market reaction time is much too long.

In the case of the electronic financial markets, automated trading is so fast that any trader whose computer is any distance from the market's computer can not respond fast enough to overcome the delay imposed by the speed of light in fiber between the two computers.

Economic "Duck and Cover" anyone?!


BTW An important societal risk to failures by all remaining suppliers with little warning can involve software or specialized data collections or other data which remains crucial to significant infrastructure and activities into the future, but have no current ability to generate enough new sales to continue operations and to preserve things that are almost impossible to replace.