Why Should you care? One reason is that understanding how all this works is the first step to making the stock trading system work for you. As an ordinary investor, your interests are not always uppermost in the minds of exchange officials who oversee the trading process. The exchange, frankly, operate to benefit listed companies and the middlemen, such as the NYSE seat holders and specialists and Nasdaq dealers, because these are the people who handle your trades and interact with the exchange.

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You should also care because the stock transcation process, much like the plumbing in your own home, can cost you dearly if you don't pay attention to it. Individual investors pay higher transaction costsno one is paid to look out for their interests. There was even a long peroid when investors were routinely cheated by corrupt practices among Nasdaq dealers. Dealers were able to get away with this behavior beacuse few investors understood the business of trading stocks. A group of Nasdaq floor brokers in 1998 also were found to be taking unfair advantage of their customers by trading ahead of their orders. If you understand the basic mechanics of how stock trade, you'll be better equipped to watch out for your own interests.

Some of the changes we'll discuss in this chapter were forced on the stock markets by Congress and the Sec, such as the switch in 2001 from quoting prices in fractions to dollars and cents. The exchanges, on their own, adoped other measures to survive an onslaught of competitive pressure. With each new change in market structure, the individual investor has been a major benificiary. My hope is that the more you understand this, the more you'll want to keep pressure on the markets.

Transaction costs today are a lot lower than they were just five years ago. Nasdaq and the NYSE have adopted new trading technologies and their middlemen have elimenated markups that increase investor costs. Quoting prices in decimals instead of fractions alone have saves investors billions. But while both markets have made huge strides, more can be done, especially at the New York Stock Exchange, which has resisted trading technologies that would erode the franchise of its specialists and floor brokers. The evolution of our markets is like the nine innings of baseball game - and we're only in the top of the third inning.