Abstract

The main role of financial markets is the determination of prices which represent information about traders interpretations of conditions influencing financial assets. Intermediaries in financial markets exist because they provide concentration and efficient dissemination of information. Technological change has a direct effect on both the ability to concentrate and disseminate information. Just as the introduction of the telegraph and then the telephone changed the nature of market intermediation, the current introduction of computer aided communications technology has brought about changes in the financial markets. In the US these changes represent non-intermediated markets known as the "third" and "fourth" markets. This papers analyses and describes these markets and their implications for the future evolution of price formation in financial markets.