Technology, Transactions Costs, and Investor Welfare: Is A Motley Fool Born Every Minute?

Computer network technology promises to revolutionnize the secondary securities market and particularly to reduce dramatically the marginal costs associated with trading corporate equities. Lowering transactions costs usually is presumed to increase trader welfare. certain unique characteristics of the secondary securities market suggest, however, that reducing the marginal costs associated with trading stocks may have the parverse and counterintuitive effect of decreasing investor welfare. Policymakers should consider theis possibility as they respond to the market's rapid evolution.