Innovation, disruption and decentralization have changed global capital markets: Traders and specialists once huddled on the floors of exchanges, passing paper ticket orders and yelling on telephones, but now algorithmic trades, lightspeed communications and massive transaction volumes characterize markets. Professor Walter Mattli assesses both the opportunities and perils of an increasingly technology-driven and highly distributed trading model. Financial professionals and investors will find powerful insights and a critical analysis of the state of global capital markets in this authoritative and timely text.
Global capital markets have undergone a massive transformation since the start of the 21st century.
The popular view of stock market trading – brokers in colorful jackets shouting and flashing hand signals to execute trades – is now a relic of history. Technology is at the core of the transformation of capital markets. But globalization and the fragmentation resulting from multiple exchanges and platforms have also altered the trading universe. In the early 2000s, the New York Stock Exchange (NYSE) housed 80% of US trading activity; now it controls just 24%. Coupled with this dynamic is the huge growth in per-day trading volumes, from millions of transactions to multiple billions in the current environment.
Institutional and retail investors have benefited from the disruption in the form of lower transaction costs and fees, but market tumult, volatility, flash crashes and algorithmic momentum trading are now the new normal, and the governance architecture of markets has weakened. Innovation and technology have moved faster than oversight of the market has.
The roots of the NYSE go...