3c hapter - Index of

202 Locavesting
time, they became more focused on large companies and markets
that could generate the high trading volumes and profi ts they
craved. Smaller companies fell by the wayside.
The Incredible Shrinking IPO Market
Today, exchanges compete to list global companies from every
corner of the Earth. Smaller cap companies have increasingly
been pushed off the major exchanges and onto the over- thecounter
(OTC) bulletin boards or the Pink Sheets.
Indeed, the New York brokers who gathered under the buttonwood
tree in 1792 would hardly recognize what they have
wrought. The notion of curbside trading seems positively antique
in an age when trading is electronic, impersonal, and more likely
to be initiated by a computer algorithm than a person. Wall Street
is less a place than a metaphor for a vast, pulsing fi nancial network
that, in its pursuit of profi ts around the globe, has lost its sense
of purpose and connection with the communities and regions it
once served.
For all of the advances, today’s fi nancial markets are a far cry
from the effi cient market mechanisms they were conceived as. Of
the trillions of dollars that fl ow through our exchanges, perhaps
1 percent goes to productive use—that is, to funding companies
through initial and secondary offerings so they can innovate and
expand. The other 99 percent is trading and speculation. (And
that doesn’t factor in the trades conducted on private networks
known, rather ominously, as “dark pools,” or the trillions of dollars
worth of derivative side bets.)
“There is no doubt the trend has moved away from the markets
as the mechanism for raising capital,” says John Katovich, former
general counsel for the Pacifi c Stock Exchange and founder
of Katovich & Associates. “Now it is completely dwarfed by the billions
of shares of a speculative nature that are just fl ying around.”
Just look at the NYSE. In 2009, just 17 percent of its revenue
was from new companies listing on the exchange. The largest revenue
generators were global derivatives trading (28 percent) and
cash trading (22 percent). 5