Forced Globalization of Trading Marts: Consolidation for Disaster
By Staff News & Analysis - February 10, 2011

EC insists on consolidation of brokerage firms … For the umpteenth time on Monday, the Securities & Exchange Commission (SEC) restated the need to drastically prune down the number of stockbrokerage firms as part of efforts to ensure that they become more professional and better capitalised. Fielding questions during her maiden address to journalists for the year, SEC Director General, Ms. Arunma Oteh, stressed that the ultimate aim is to ensure sanity in the nation's equities market, and in line with her avowed zero tolerance stance for market infraction of any kind. Perhaps prodded by the SEC management, the Nigerian Stock Exchange (NSE), recently suspended 61 brokerage firms for not being adequately capitalized to the minimum of N70 million, at a time when moves were made several months ago to raise their capital base to N1.5 billion. – Daily Independent

Dominant Social Theme: It is important to trade correctly and with increased depth.

Free-Market Analysis: The article excerpt above sounds as if it could have been written anywhere in the West, but its focus is the Nigerian securities industry. The replication of the US model is startling. The regulatory body is called the SEC and the issues being discussed have to do the Nigerian stock market, brokerage firms and the US catchphrase "zero tolerance" – regulatory authoritarianism in other words.

This Nigerian episode is symptomatic of several larger issues having to do with modern Western economics. The argument that "bigger is better" when it comes to economic structure generally is certainly an important dominant social theme of the Anglosphere. One can take the view of course that the replication of Western-style (American) trading is merely the result of a superior system; and this goes for US-style central banking as well. In fact, one can count on the fingers of one hand the country's that had not until recently installed Western-style central banks and strangely enough the West has not-so-coincidentally been at war with several of them.

What is clear is that the Western securities trading and fiat-money paradigm is increasingly ubiquitous. The methodology is actually driven by fiat-money and sustained by securities centralization. We have written about this before – pointing out that securities market consolidation speeded up considerably in America after the Civil War, as mass-produced equity financings were pioneered and refined. Today, the centralization is ongoing and global. The more that securities trading is concentrated, the more profitable – lucrative – it is for those who control it. The order flow becomes almost inconceivably massive along with the commissions. These are incredibly powerful twin forces: central banking and centralized (electronic) securities trading.

One can argue of course that the evolution of the "modern" money system is an outgrowth of its competitive efficiency. When evaluated this way, a case can be made that the system evolved around the world because it outdid all the others and thus was selected by the Invisible Hand. But this is a little like arguing, in our view, that wars of conquest are regularly pursued as an outcome of marketplace competition. It is simply easier, if one wants to adopt this perspective, to take what one wants; this is the reason, according to this argument, that war remains a market solution of choice.

Of course, war may offer compensations but that does not mean it ought to be the preferred tool of wealth-building. War eventually disadvantages both victors and vanquished alike; the saying "those who live by the sword die by the sword" probably encapsulates a valid observation. Violence begets violence and its frequent application does not necessarily given an advantage to the individual applying it. The current consolidation of trading marts may seem reasonable and driven by business-priorities. In fact it is a violent process that tramples what would be a more normal and predictable paradigm: specialized marts controlled independently (in the US and around the world) and linked as necessary via emergent electronic communication technology.

The same can be said for central banking and securities-trading centralization. Both are entirely artificial financial methodologies that have been imposed on the West – and now the world – by force. The force in this case is mercantilism, which uses the power of the state via law and regulations to provide commercial advantages to those shaping legislation to their advantage. The behind-the-scenes maneuvering is not so obvious as outright conquest but it has the same effect. Leviathan's force of law – and punitive results – are brought to bear on those who might be possible competitors. They are removed not by the market itself but by government regulatory leverage.

Mercantilism, especially in its initial phases, is not very evident to the body public, and this makes it a most useful tool. The regulatory strategies that it adopts can be disguised as mechanisms implemented for general welfare. Even mercantilism's inevitable consolidations can be presented as necessary for social and industrial "efficiency." Central banking partakes of this justification as does globalized securities trading. It is this trend that is currently in play in a post-crash global economy. The unification of markets and products proceeds apace, as we can see in this recent CNBC news excerpt:

Global Stock Exchanges Are Headed for Major Consolidation … Germany's Deutsche Boerse is in advanced talks to buy NYSE Euronext, and the London Stock Exchange has agreed to buy Canadian stock market operator TMX, as exchanges globally look for ways to boost their markets and cut costs. Together, Deutsche Boerse and NYSE Euronext would dominate exchange trading in continental Europe. The companies said they could cut costs by 300 million euros ($408.7 million) a year. The combined group would have headquarters in New York and Frankfurt, with Deutsche Boerse shareholders holding about 60 percent of the combined company and NYSE shareholders holding the rest.

It is the Anglo-American power elite that evidently and obviously stands behind these ever-vaster consolidations – the same players that have developed and propagated central banking. It aims ultimately at creating a single market that can trade every kind of available instrument (including derivatives and carbon credits) under the watchful eye of a single super-regulator.

In fact, this is not very well known right now, but if one does the research it soon becomes clear that the US securities regulatory model has been spread around the world with quiet determination. Just as US-style securities markets have been propagated throughout Africa and Asia, so US-style regulation with all its illogical inconsistencies and corrosive industry favoritism has been installed as well.

The Anglosphere's securities trading model nestles within the West's (and now the world's) larger banking mechanism. They are two halves of a whole. When Western bankers print money to excess, various securities markets begin to expand artificially – a bubble is being created. Such "booms" are inordinately profitable to those who control the banking and securities trading stimulated by fiat overprinting. The elites who control central banks, commercial and investment banks and ultimately the trading marts benefit from all phases of the business cycle.

When central banking overprinting of fiat-money causes ruinous collapses, the elites that stand behind the system strive to further consolidate power by claiming that the free-market has "failed." When the ruin affects the marts themselves, as it must, the powers-that-be form committees to issue white papers recommending yet more regulations and banking and securities industry consolidation. The system is not just massively controlled, it is constantly centralizing and enlarging as central-banking causes collapse after collapse and consolidation after consolidation.

After Thoughts

The elite goal of a single worldwide trading mart encompassing every instrument known to man is the "flip side" of central banking. It is the bastard child of a union between the regulatory state and reckless money printing. It will prove no more "efficient" than fiat currency itself – and just as ruinous.

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