Watching CNBC and the NYSE specialists post with all the floor brokers gathered to make their commissions when trading opens up on this stock makes the case for all electronic trading. How can you have a fair and orderly market with orders lined up all the way down the hall at the NYSE?
Another thing that no one ever talks about is the problems that stem from the deliberate overpricing of new shares which creates a huge wealth transfer from a newly public company to the major customers of an investment bank. Shareholders are much better off in the long run with a higher net worth than with an artificial and temporarily high stock price. Remember that IPO’s are allocated to clients who pay big commissions, Steinhardt and Cramer come to mind. Those responsible for completion of an IPO are the lead underwriters. If the brokers were held liable for the tremendous carnage inflicted on early buyers of IPO’s the mispricings would end. Those responsible for a company are the directors. If directors were held liable for the eradication of corporate assets by allowing for an IPO to go out at say half the opening price, the mispricings would end. Why should a firm leave so much on the table for Wall Street to pocket?
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