Wall Street traditionally had made money through brokerage services, including buying and selling securities on behalf of clients, as well as providing clients with advice. When the prices of these services fell in response to competition from low-cost online providers, profit margins suffered.

Another important source of profits had been bid–ask spreads on securities that Wall Street firms held available for sale to or purchase from investors. (These spreads are essentially markups or markdowns on security prices that provide compensation to the firm for making a market in the security.) The new electronic networks cut into this market as well, reducing the spreads that could be charged by security dealers. LO.1