While equity market structure did not directly cause the demise of Bear Stearns and Lehman, nor did it force the acquisition of Merrill Lynch, the margin compression that resulted from the technological revolution that we are experiencing forced traditional broker/dealer management to seek other sources of revenue. The first phase of their response was to diversify to more profitable businesses, often with more risk.

Moving forward, I think we will see both a reduction in risk and a rationalization of certain business lines. This will result in some consolidation and a change to a more a value-added, client-focused business. We have seen the buy-side take advantage of the structural changes in the equity marketplace and the recent events will further the current trend of institutions taking more direct control of trading.

The market will continue to be complex, not only with multiple execution options, but with a difficult environment for active managers to outperform the market and their peers. I think the remaining broker/dealers will become even more important as a source of advice and access to capital markets. As the market evolves, we will see continued new entrants that provide buy-side clients the ability to reduce transaction costs and improve returns for their clients.

Timothy J. Mahoney, Chief Executive Officer, BIDS Trading