Competitive forces are slowly pushing a reluctant Wall Street to accept the equity markets of the future. In December, the New York Stock Exchange agreed to eliminate Rule 390, which prevented NYSE member firms from trading anywhere but on the Big Board. Meanwhile, the US Securities and Exchange Commission has proposed to widen the access of non-NYSE dealers to NYSE stocks and to allow non-NYSE exchanges to get in on NYSE initial public offerings. So far, so good, but these pro-competitive changes don’t go nearly far enough.

Many practices still work against the interests of small institutions and retail investors, and few of them understand this. If the playing field is to be truly level, everything associated with the closed, broker-oriented environment of the past should be swept away; the exchanges should go public; and all investors should have access to the data they need to get the best possible deal whenever they trade. Those who claim that full competition will fragment the market into many inefficient little exchanges fail to recognize that any number of them can now be tied together with technology to assure maximum liquidity.

The industry can take four fundamental measures that would not only...