WAR ON WEALTH: The SEC, the National Market System and the Flash Crash

U.S. capital markets are dying. The "flash crash" and the virtual disappearance of IPOs for new technology companies show the SEC's plan to impose antitrust-based fairness as a complete failure. Intended to help the small investor, it has instead caused him to miss out on the best new investments, which are going to foreign markets, and to be exposed to volatility like the world has never seen before. The NYSE and Nasdaq are being effectively dismantled as their market shares drop under the "perfect competition" of dozens of electronic "exchanges" invited by the SEC to take the Big Board and Nasdaq down. The U.S. share of the value of international IPOs dropped from 77.3% in 1996 to 1.9% in 2008. And Accenture, a Big Board stock, lost 99.975% of its value in several seconds during the flash crash. Both of these are seen to be the result of the SEC's self-serving effort to redistribute advantage and wealth from Wall Street to small investors. Like all redistributionist plans, there have been unintended consequences. The collapse of the U.S. IPO market is one and the flash crash is another. But the SEC isn't done yet. More market structure interventions are in the works that will do even more damage.