Finance and the internet: The new battleground

Forget about the euro. Forget about Y2K. These are no more than simple exercises in crisis management. E-commerce is what you should be preparing for: get the power of the internet around you. It is a power that is revolutionizing equities trading, a power likely to spread into core investment banking, in the process stripping away the inefficiencies previously integral to the financial system. Established market leaders already face an array of upstart competitors. There are new banks, new trading systems. Pricing and research are the main targets. All-comers now have access to liquidity. Huge amounts of research are freely available. Ma, Pa and the Belgian dentist can pile in there with the best of them. All under the cloak of anonymity. As a senior investment banker puts it: "This business used to be a pitched gun-battle. It could get messy but you knew who the opponents were. Not any more. It feels as if we're being shot at from every direction." Heed his words but don't delay in joining the fray. Three years will be too late. E-commerce is the power of the future. But it's here now. Antony Currie goes behind the wires to report from the new frontier.

Andy Klein Bob Lessin Philip Cooper Jeff Max Christopher Lynch Chris Surr Michael Paull

Investment banks are scared. They may well play it down but the fear is palpable. It's caused by e-commerce, a catch-all phrase for the many advances in technology centred on the phenomenon that is the internet.

The big players will try to convince you that what they are doing is keeping pace with, if not driving the pace of, the benefits that technology can bring. And there may be some truth in that. But we are now at a stage where the previous wholesale financial markets structures are beginning to break down as the internet spreads through them.

Exchanges and their members no longer try to work in harmony, battling instead against each other's rival systems. Retail investors, empowered by the web, are fast becoming much more proactive and influential, at least in US equities. And across the board investment banks face the prospect of traditional revenue streams contracting or disappearing altogether as the internet brings transparency and efficiency to once-closed areas.

Investment banks usually have been the ones having to respond, rather than initiate.