In the bad old days of stock auction markets [sic], owners of shares of companies—companies nominally public by their status as a shareholder company—would meet in a crowd, face to face, and offer their shares for sale at a price or offer to buy another’s shares at a price. Bid prices and asking prices would converge, and sales would be executed.

Only the rich could play this game, though; Middle America (and Middle Netherlands where such auctions got an early start some hundreds of years ago, and Middle You-Pick-the-Nation) couldn’t afford to play. To be sure, Middle America (and the others) in those early days had little interest in playing, and the matter was a no harm, no foul situation. Then the broker industry developed, and brokers would act as middle men in these auctions, doing the mixing and matching of buys and sells—for a small remuneration, of course—and the shareholders didn’t need to meet in person. But those remunerations—commissions—kept Middle America priced out of the game.

Then discount brokers developed (think Charles Schwab), and Middle America (and Middle xyz) could play. The broader breadth of participation both increased stock prices themselves, and they gave companies all across the economy access to tons of additional money, from us little people, with which to do R&D, sales, production, etc. After all, little peoples’ nickels and dimes add up—it’s how the earlier Five and Dime stores prospered and how today’s deep discount stores prosper. It also gave us little people additional ways to save and to build our nest eggs.

Today, there are even brokerages that operate entirely online, for a song: typical remunerations for effecting a buy or sell today range from $5 to $10 per some number of thousands of shares traded (when Schwab was starting out, they charged $35 per hundred shares traded).

Now the New York Stock Exchange wants to

introduce a midday auction

ostensibly to

draw trading away from private venues such as dark pools….

Never mind that those dark pools are capitalist, free market responses to excessive interference in today’s financial industry (of which stock markets are only a part) by the Security & Exchange Commission and the myriad mechanisms spawned by Dodd-Frank.

The new NYSE auction would take place in the middle of the day, when trading is at its slowest. One draw of such auctions is they allow big investors to put in large orders without immediately moving the price of a stock[.]

Auctions work differently than continuous trading on markets, which match orders as they come in at an ultrafast pace. In an auction, buyers put in a maximum price and quantity they are seeking to fill and sellers put in a minimum price and size they are willing to sell over a period of time. At the end of the period, orders are filled at a price set by supply and demand for shares.

Just like those original bad, old days.

I’m not sure this isn’t a return to those bad old days when only the rich could play. I’m not sure it is, either; it’s something that needs to be watched very carefully—even by the SEC.