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Why the Impact of Technology on Securities Demands Advanced Oversight

According to Professor Chris Brummer, financial services bear the greatest brunt of disruptive technology, although both academicians and policymakers lack a consistent understanding of the phenomenon, and worst still, they’re unable to provide coherent regulatory remedies. The various channels by means of which innovation flips market practices over are part of the problem. Making matters worse, there’s a popular understanding that stable gatekeepers, for example clearing systems and broker-dealers form the backdrop for the operation of securities regulation. As such, effective regulation is required to cope with the realities the twenty-first century technology presents capital markets.

Today, securities regulation continues to experience more profound obstacles, as unprecedented scope of technological advancements continue to upset the market microstructure helping drive capital markets. Thanks to superior computer power and information systems, fresh market entrants on the driving seat, Pushing vital financial brokers, for instance investment banks and exchanges, to the periphery. Better equipped private entities and sites are now providing brokerage and facilitation for capital market liquidity, with public offerings playing an insignificant role, which is easy to explain against the backdrop of inconsistent reforms to capital raising regulation.

It has become important to closely scrutinize such developments, against the backdrop of the global financial crisis, and as the rate of innovation and disruption in markets gain tremendous speed. Nowadays, private entities are outperforming IPOs in generating capital as more resources are built to process requirement. For blue-chip companies’ securities, these are easily traded off exchanges at the same volumes as on the companies themselves. Such disruptions keep accelerating with technological advancement, and collectively, they’ve left regulators without any effective response as they, too, attempt to determine their role in the new financial markets ecosystem. Chris Brummer asserts that securities policymakers have responded to the impacts of innovation by either adopting a “hands-off” approach or agreeing to “comical” compromises, for instance the use of Twitter and acceptance of tweets as a means with which to communicate with investors.

To create a theoretical framework for handling disruptive technology calls for flexibility of insights to enable the accommodation and scrutiny of distinct and dynamic market environments against growing sets of regulatory responsibilities and policy objectives. As such, there’s the critical need to avoid traditional suppositions about how regulatory policy gets to function.

Any highly effective securities regulation demands upgrades that accommodate the role of information technology (and virtual environments) in capital markets micro-ecosystems subject to extremely rapid change. Any such upgrades to securities rules have to address the computerized financial markets that have altered the understanding and operation of market liquidity. Equally essential, private marketplaces that are creating a consistently-expanding range of solutions catering for security offerings and trading require accommodation.

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