Financial Apartheid

Strong title, but basically true. The toxic brew of regulations over the past decade or two has pushed companies and trading out of the lit markets into darker corners, where only the elite can meet and greet. One example from the book of unintended consequences:

One of the big drivers of the shrinkage in our public markets is that we no longer have a different market structure specialized for smaller companies, like we did in the bad old days. The old Nasdaq dealer market had a very different market structure from the old NYSE auction market. In the old Nasdaq dealer market, only dealer quotes were disseminated to the general public. Customers had no way of getting wide exposure for their limit orders and competing with the dealers. The result was a bid-ask spread so wide you could drive an IPO through it.

The wide spreads that we thought were a scandal did have one redeeming social benefit: They motivated the industry to market smaller companies to investors.