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The overwhelming wave of trading has spilled over to other exchanges. For the first nine months of 1986, volume on the American Stock Exchange soared to 2.3 billion shares, 53% higher than the same period a year ago. In Chicago, Midwest Stock Exchange Chairman John Weithers exults that "in the past year we did more volume than we did in the past 92 years combined." Trading volume on the Pacific Stock Exchange surged 35% in the first three quarters of the year, compared with the same period in 1985.
One of the chief beneficiaries of the computer-driven boom is the over-the- counter market known as NASDAQ (for National Association of Securities Dealers Automated Quotations). Founded in 1971, NASDAQ does not own a trading floor. Instead, the system offers computerized listings of 4,444 mainly small- and medium-size corporations (worth: about $300 billion) whose shares can be bought and sold on 2,100 terminals nationwide. This year NASDAQ's daily average trading volume of more than 100 million shares made it the world's third largest exchange, after New York City's Big Board and the Tokyo Stock Exchange.
Trading profits have also been phenomenal. Among the most successful institutional investors, it is not uncommon to find annual growth rates in assets of 20% or more. On portfolios of $1 billion or so, even a fraction of a percentage in commission means millions in income. Dean LeBaron, the sole owner of a highly automated Boston-based investment firm known as Batterymarch Financial Management, manages pension funds worth between $11 billion and $12 billion. LeBaron's personal income fluctuates at around $30 million yearly. George Soros, a Hungarian-born, Manhattan-based investor who manages a private fund named Quantum, has seen the value of those assets jump from $449 million to $1.5 billion in one year. Soros' personal profit for the past twelve months is an estimated $180 million.
What distinguishes the new institutional investors from other kinds of stockholders, however, is their lack of interest in almost all aspects of corporate performance except stock price. Indeed, many of the institutions, such as pension funds and mutuals, are virtually constrained from thinking of anything else in their role as trustees for smaller investors. According to critics, one result has been that the U.S. investment community's already legendary focus on quarter-by-quarter corporate economic performance has become more pronounced than ever.
Management Expert Peter Drucker has used the term speculator's capitalism to describe the institutional loyalty to short-term profit that he believes is now the market's driving force. As a result of that impetus, Drucker wrote recently in the Wall Street Journal, "corporate managements are being pushed into subordinating everything (even such long-range considerations as a company's market standing, its technology, indeed, its basic wealth-producing capacity) to immediate earnings and next week's stock price." In Drucker's view, that attitude stands in contrast to the practices of such U.S. competitors as the West Germans and the Japanese, whom he lauds for having the attitude that business is a "wealth-producing, goods-producing, jobs- producing entity."