Academic journal article Monthly Labor Review , Vol. 118, No. 9
Employment of wage and salary workers in this industry grew by 28 percent between 1984 and 1993; professional jobs almost doubled, while weak job growth for clerical workers reflected productivity gains from technological advances
As global markets have expanded and computerized trading has increased, tasks performed by workers in many occupations in the security brokers and dealers industry have been transformed. The most recent data collected on occupational staffing patterns in the industry reflect the component firms' adaptation to consequences of the 1987 market crash and to decades of electronic advances. The industry has responded to these changes by increasing employment in highly technical professional occupations such as computer scientists and statistical financial analysts, and by streamlining managerial and internal analysis jobs. The increase in the professional share of the industry's employment has largely offset a decrease in the managerial share. This article examines the changes in occupational employment within the security brokers and dealers industry through some of the steepest bull and bear markets of the post-World War II period.
The security brokers and dealers industry (SIC 621)(1) includes bond dealers and brokers, mutual fund agents, security traders, securities underwriters, oil and gas lease brokers, and tax certificate dealers. In May 1993, it employed 349,880 workers. (See table 1.) The industry is a component of securities and commodities brokers, dealers, exchanges, and services (SIC 62).
Brokers in this industry act as agents in security transactions for individual and institutional clients. Dealers buy and sell securities for their firm's own account and risk.(2) Investment bankers, also included in this industry, are primarily engaged in the initial public offering of securities. They underwrite and distribute shares, while generally continuing to act as market makers in those issues.
Broker-dealers are required to register with the Securities and Exchange Commission (SEC), a Federal agency that governs several self-regulated organizations (SRO's). They also must obtain membership in the National Association of Securities Dealers (NASD). A broker-dealer distributing new issues underwritten by NASD members, or distributing shares of investment companies sponsored by NASD members,(3) must become a member of the NASD.
Firms trading on the Nasdaq market (the over-the-counter market) as either strictly order-entry firms (trading as brokers or dealers) or market makers (dealers that hold an inventory of Nasdaq listed securities) must meet NASD requirements. Nasdaq is an electronic trading network. The Nasdaq Workstation II provides a centralized quotation service, as well as automated executions, trade reporting, and trade negotiation.(4) Traders using the Nasdaq system can link to the major exchanges through the Computer Assisted Execution System Intermarket Trading System (CAES/ITS).
If a firm is brokering or dealing stocks listed on an exchange, it is often a member of that exchange. To become a market maker in an exchange listed security, a firm must apply to the exchange. Unlike the case for Nasdaq, each security trading on an exchange can only have one market maker. By using a correspondent firm to clear and execute its trades, a firm can trade on an exchange without being a member.
Chart 1 shows the trading volume within the major world securities markets. It displays the significance of both the New York Stock Exchange (NYSE) and Nasdaq. The high number of members and the consequential trading volume on the NYSE cause the resulting data from this organization to be used as a proxy for the operations of the entire industry.
Inflation during the late 1970's caused many companies to begin to trade at undervalued prices, and by the early 1980's, lower interest rates helped to make purchasing securities lucrative. …