I alluded to the changing face of a neighborhood and the implications it could have nationwide so, here’s a nugget for thought.

I’ve been working down in the Wall Street area these days which has been very much the treat since I was never really a big haunter of the downtown neighborhood and so the experience has been one of exploration and discovery as I become familiar with the environs.

It has changed greatly though since the days when I rode the yellow beast. Time was, I could drive my car right up Broad Street past the NYSE building and Federal Hall. Not anymore, since September 11th the area around the Exchange has been marked by heightened security, with those obstacles blocking any vehicular traffic, bomb sniffing dogs, pick up trucks parked at angles to prevent someone from driving right up in front of the building, plenty of guards and police too.

So, all these steps and precautions have been taken - all at great expense but, to protect what? A future museum?

If you hear a ticking sound, it’s the days of NYSE’s trading floor counting down because those days are numbered. Those days of men dressed in sharp, crisp and expensive suits, making their way to the southern tip of Manhattan Island to move billions of dollars and live a lavish lifestyle are coming to a rapid end.

Your first thought might be that the planes hitting the towers on September 11th somehow succeeded in their work but, the truth is the groundwork was laid long before that fateful day, if anything the planes flying into the WTC only hastened the process.

This is testimony by Laura S. Unger, Commissioner, U.S. Securities and Exchange Commission Concerning the Effect of Technology on the Capital Markets:

Technology has changed the world faster than many of us could have imagined, and continues to change it at a pace that is both exciting and daunting. More and more information is available to us everyday. Nowhere can the effect of technological change be seen any clearer than in the securities markets...

...In a way, the Internet is the wild card that makes it difficult to predict what the securities market will look like five or ten years from now. By some estimates, 21 million people will have online accounts by the year 2003.[1] According to a study published in February 1999, the key economic factors that will have a large impact on the growth of electronic commerce will be ease and cost of access, convenience, and the appeal of mass customization.[2] Financial services is one of the top five categories of business-to-consumer electronic commerce today.[3]

The Internet is dramatically transforming how individual investors participate in the market by providing them with more timely and high-quality information. In this respect, it furthers one of the most fundamental principles of securities regulation — transparency.

Currently, about 147 million people use the Internet worldwide. Approximately 77 million of these users are in the United States. One source estimates that 21 percent of all domestic households have Internet access.[4] Predictions are that there will be 300 million users worldwide by the end of the year 2000, and 720 million by the end of 2005.[5]

Now, this is over five years ago!

So, when I look from the office I’m in at the surrounding buildings, I imagine I shouldn’t be surprised to find instead of looking out at harried financial workers working late and putting in long hours, I’m looking across into the living room of someone who has moved into a formal commercial building converted into a luxury rental.

Then there’s this testimony in Congress from 2002:

There is a quiet revolution starting in the U.S. Listed marketplace. Investors and traders who have become disenchanted with current market structure are moving beyond the experimentation phase. They are starting to employ ATSs like the ones represented here today. The value proposition is clear. Execution that is electronically matched without human intermediation takes one middleman and the resulting economic impact of that middleman out of the equation. What makes that possible today? I would submit to you that advanced technology, industry protocols, and high-speed networks support this type of healthy competition without the resultant risk of fragmentation.

This quiet revolution combined with the decimalization of stocks, the consolidation of the New York Stock Exchange specialist units, the requirement to submit quality of execution data for the public record, and the extended bear market in the U.S. Equity markets is in the process of causing profound change to the security industry.

Or how about this:

...But many planners see a domino effect that could intensify patterns of sprawl - just at a time when urban areas were making a modest comeback. Backup facilities and satellite offices need a labor force nearby, as well as infrastructure and commercial development. Westchester officials already are saying the NYSE facility would trigger growth. Some Fidelity employees now working in Boston have moved to the suburbs in anticipation of needing to be at regional sites in Smithfield, R.I., or Merrimack, N.H., one executive said.

While real estate specialists see no conclusive evidence of a wholesale exodus to the suburbs, security concerns and soaring insurance premiums for urban properties have become reasons for businesses to quit the city. Some government agencies are already headed in that direction, as in the case of the Office of Homeland Security, mulling headquarters in rural Virginia rather than Washington D.C.

“We're going to look back 20 years from now and ask how this happened,” said Harvard law professor David J. Barron, who believes that such symbolic moves, as well as legal and policy frameworks, dictate development patterns. “We built the [interstate] highways for defense, and the next thing you know we had a whole way of living that no one ever necessarily chose.”

Now, let’s put it in other terms - New York City’s history has been built around commerce, first because of its geographic location as a port it being a portal for the movement of goods from this country out into the world. Over the last fifty years, New York as a port has diminished in importance as carriers have chosen to use other ports for larger ships and shipping itself has undergone a transformation (I believe Virginia has the busiest port now on the East Coast and Newark has taken the rest of New York‘s freight traffic). This is an industry that’s gone from the city now (ever hear of On The Waterfront?).

Financial services were a sector where the city relied on a lot of revenue - taxes, jobs and the ancillary benefits resultant from having the industry located in and around Wall Street.

What happens though, when trading becomes electronic and decentralized? What replaces that industry and those jobs. What does it mean for New York and the nation?

The merger announced May 3 combining the Deutsche Börse Frankfurt (Frankfurt Stock Exchange) and the London Stock Exchange (LSE) will create the biggest stock exchange in Europe. The new entity, to be named International Exchange (iX), will be the fourth largest stock exchange in the world following the New York Stock Exchange (NYSE), Nasdaq and Tokyo.

Most commentators see the Frankurt-London link-up as being a “first step towards a global stock exchange” which might well result in a unified pan-European stock market within the next two years. The British newspaper the Guardian writes: “A single global stock market is now one step closer to reality.”

But this increasing concentration is also intensifying rivalries within Europe and between Europe and the United States. In the same report quoted above the Guardian warns: “The merger of the London Stock Exchange and Frankfurt’s Deutsche Börse might be a blow to the former.” However, it then goes on to say: “but that's no reason to stand in the way of globalization.” Other commentaries place more emphasis on the emergence of a European rival to counter market domination by the NYSE.

Yes, it’s a changing world we live but, it’s always better to try and anticipate the change rather than get swept up by it.