Stealing the Market: How the Giant Brokerage Firms, With Help from the Sec, Stole the Stock Market from Investors [Paperback]

Martin Mayer (Author)

Book Description

Publication Date: July 1993

The US stock markets were designed to handle a large volume of small orders for individuals who paid brokers well to do their business. Today, they process a small volume of large orders from institutional investors, most of whom pay their brokers only a few cents a share. The community of brokers gets even by trading against its customers, often secretly or through hidden nominees, while the institutions are seeking new settings for trading without informing their brokers. And the SEC has proved unwilling or unable to step in and police these off-the-floor activities. This insidious phenomenon - the growing tendency of brokers to trade against their customers - affects the investor. This book chronicles the history and implications of these changes, which burst into public consciousness in the summer of 1991 with the revelations of Salomon Brothers' abuse of its customers in the US bond market. The author, a financial writer, introduces a cast of characters, from Leo Melamed, born in a Polish shtel - who as head of the Chicago Mercantile Exchange made some people very rich by inventing a cadre of arbitrage traders to William J. Casey, former spymaster, who as chairman of the SEC engineered the end of fixed broker commissions. Here is a close look at the world of finance as it existed before and after the computer era - and a sober analysis of what may have been lost, financially and otherwise. Martin Mayer is the author of "The Greatest Ever Bank Robbery" and "The Bankers".

Editorial Reviews

From Library Journal

Well-known for his popular and very readable books on financial matters ( The Greatest-Ever Bank Robbery , LJ 10/1/90), Mayer presents a different perspective on the stock market, saying that the stock market no longer serves who it was meant to. He analyzes the role of the individual investor with respect to that of the large institutions, specifically brokerage firms, who in the past worked for the individual investor. Today, according to Mayer, they often work against the client by building up their own accounts at his expense. This interesting, thought-provoking, and controversial tome will appeal to many who follow stock market activities.
- Steven J. Mayover, Free Lib. of Philadelphia
Copyright 1992 Reed Business Information, Inc. --This text refers to an out of print or unavailable edition of this title.

From Kirkus Reviews

Forget the misleading subtitle. To Mayer (Whatever Happened to Madison Avenue, 1991, etc.), virtually all members of the US financial community have, by pursuing their own selfish interests, undermined the public purpose of securities markets--i.e., to provide reliable price information necessary to allocate the domestic economy's resources. Worse yet, Mayer charges, cops on the Wall Street beat are responding to opportunists' depredations with winks or nods. In a savvy, wide-ranging overview longer on anecdotal than statistical evidence, Mayer warns that the open, honest, and liquid markets that have contributed so greatly to American prosperity face grave dangers. With a big assist from advances in data- processing and telecommunications technology, for example, institutional investors are, he says, doing business among themselves, filling orders at prices that need not be disclosed. And with less than one fifth of their income now accruing from commissions, according to the author, brokerage houses apparently are on the game as well, trading for their own accounts--and frequently using inside information about client plans and strategies. In the meantime, Mayer cautions, the development of so- called derivative instruments (notably, options on stock indexes) and the trend to passive management of portfolios designed to mirror the performance of popular market averages have greatly increased the risks of manipulation. At best, the author argues, federal regulatory authorities have been complacent witnesses to these unfortunate events. Among other sins of commission, he cites the SEC's decision to let major institutions traffic in privately placed as well as publicly offered securities. Not surprisingly, Mayer offers a short list of needed reforms. He proposes full disclosure for all transactions involving equity in American enterprises, plus confiscatory taxes to discourage short-term trading by investment professionals. Mayer would also impose levies to create friction between futures and exchange markets that currently tend to move in lockstep. A timely and thoughtful alert on a socioeconomic problem whose implications are (or should be) of general concern. -- Copyright ©1992, Kirkus Associates, LP. All rights reserved. --This text refers to an out of print or unavailable edition of this title.

Product Details

• Paperback: 224 pages
• Publisher: Basic Books (July 1993)
• Language: English
• ISBN-10: 0465082246
• ISBN-13: 978-0465082247
• Product Dimensions: 8.8 x 5.7 x 0.7 inches
• Shipping Weight: 9.6 ounces
• Average Customer Review: 4.0 out of 5 stars  See all reviews (1 customer review)
• Amazon Best Sellers Rank: #2,944,689 in Books (See Top 100 in Books)

Customer Reviews

Most Helpful Customer Reviews

2 of 3 people found the following review helpful:

4.0 out of 5 stars Shows how the SEC failed to enforce basic regulatory rules, November 12, 2005

By 

Michael Emmett Brady "mandmbrady" (Bellflower, California ,United States) - See all my reviews
(VINE VOICE)    (REAL NAME)   

This review is from: Stealing the Market: How the Giant Brokerage Firms, With Help from the Sec, Stole the Stock Market from Investors (Paperback)

Mayer (M) demonstrated great prescience in this 1992 book by showing that the stage had been set for the great stock market bubble of 1995-2000.One of the major ways this bubble was able to keep growing,besides the Federal Reserve System's(Alan Greenspan and the Governor of the Federal Reserve District Bank of New York)abject failure to prevent margin account loans,used to fund the purely speculative purchase of stocks, from increasing from $38 billion in 1992 to just under $280 bilion in 1999,was the complete breakdown in basic market regulatory enforcement by the Securities and Exchange Commission(SEC).One could make a good guess that Spitzer,the present attorney general of New York who has attempted to clean up much of the mess on Wall Street,had read this book carefully.All he would have to do is connect the dotted lines .Massive accounting fraud combined with the outright theft of tens of billions of dollars by various brokerage houses who were allowed to trade against their customers after hours or in secret.All of this might have been prevented if Bill Casey had been running the SEC.There are a few minor slips relating to the history of economic thought that are made on page 148.Joseph Schumpeter is sui generis.He really should not be bracketed with the Austrian economist E.Bohm-Bawerk.Likewise,Schumpeter was extremely critical of the circular flow model.This model is a static,stationary,timeless model of no or little fundamental change or change which is slow,perceptible(like a baby growing up),and easy to adapt to, given the continuous repetition of the same events throughout time.Schumpeter emphasized the impact of dynamic,unexpected changes brought on by innovations that created massive discontinuities in the existing methods of production and finance.He emphasized the creative destruction brought on by technological change and advance.