Odds against US allowing Net gambling

In the US, the federal government wants to keep the doors shut on online gambling. Illegal online gambling - meaning no US-based site can offer any type of gambling-for-money experience on the Internet - got the thumbs down again last week from a US federal study.

The National Gambling Impact Study Commission spent two years preparing its report on all forms of gambling, and it argues that the current Net ban should remain in place. The group wants additional law enforcement strategies for curtailing Web gambling, such as a prohibition on wire transfers of money to known gambling sites based outside the US.

Now, you might agree with the ban depending on your take on gambling and on the ease with which someone can send money, without much premeditation, off into the ether using a computer. Certainly, it's easy enough to kiss your cash goodbye when you don't have to physically transport yourself to a turf accountant or a casino.

But the ban seems a tad sanctimonious given that the US government has so far smiled upon the biggest online gambling set-up going. I mean, of course, online share trading, now responsible for a fourth of all trades in the US. Increasingly, investors don't seem to use the Net to make the kind of carefully-thought-through buy-and-sell decisions which in the past would have required a phone call or visit to a broker. Instead, the Net has encouraged people to throw money, and often vast amounts of it, after shares which are only a mouse-click away.

That's why every portal and news site these days includes share prices. All those online traders spend their day constantly checking whether they've gained or lost. California, the birthplace of such things, is particularly ridiculous in its obsession with point-counting.

In casual conversation, people tell you how many points they're up or down. Not that you'd asked.

In contrast to small investors are the high rollers of online gambling - oops, I mean trading - the so-called "day traders". Day traders are people who, hand on mouse, buy and sell stock at a dizzying rate online as they ride the roller-coaster ups and downs of volatile shares, particularly Internet and technology stocks. Like many small online investors, they work against the grain of long-accepted investment strategies, going for the ultra short-term gain (or so they hope) rather than the medium-to-long-term approach.

Day trading isn't a hobby or even a personal investment strategy. It's a job and a way of life. The people who do it can make fantastic profits (and, of course, losses), all without ever having to leave the house or change out of their pyjamas. By all accounts, it is an extraordinarily stressful job as well. Imagine having to read all those technology news-sites just to make sure some company-bashing story isn't about to send your biggest investment on a downward spiral before you can sell.

Day traders are creatures that could never have existed without the Internet and online brokerages, because in the past only bona fide brokers would have had immediate access to share prices and the ability to trade instantaneously. And that's what has begun to worry the US Securities and Exchange Commission and the National Association of Securities Dealers (NASD - the people who formed the Nasdaq exchange), which are both examining the issue.

Referring to day traders back in January, SEC chairman Mr Arthur Levitt, pointedly noted: "Investment should be for the long run, not for minutes or hours." That's hardly going to strike fear into the hearts of people who, minute by minute, gamble huge sums online as their day job.

The SEC needs to decide whether to reframe the rules of trading to stem day traders or not.

It's generally accepted that day traders themselves make the technology stock market as unpredictable and prone to excessive gains and losses as it is (that's why NASD is concerned, since the Nasdaq has most technology and Internet shares). What overall effect, if any, such rapid trading will have on the global economy remains to be seen but certainly, it has spelled major gains and losses for other investors, who find their own shares shoved upwards and downwards on the daily whims of day traders.

And of course, for a lot of those investors it is precisely that extremely short-term, unpredictable snap of the investment whip that keeps them in the online market. All the buzz of gambling, without the legal problems!

Karlin Lillington is at klillington@irish- times.ie