A 10-Point Plan for Regulation (Without Being Overwhelmed)

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. Partly, the challenge emanates from the numerous ways by which invention upends trade activities. Another problem is the common misconception that clearing procedures, broker-dealers, and other “watchmen” provide a solid foundation upon which securities regulation operates. As such, effective regulation is required to cope with the realities the twenty-first century technology presents capital markets.

In this century, securities regulation faces more challenges than ever before, with new technology overwhelmingly altering the little market fundamentals that manipulate capital markets. Advanced computer resources and information technology has helped push to the sidelines important financial go-betweens, including investment banks and exchanges, paving the way for new market participants. When you also consider the negative impact of sporadic improvements to the capital raising process, you understand why private players and places with increased sophistication are playing host and intermediary to capital market liquidity, reducing the significance of public offerings.

Such developments now call for painstaking examination in the wake of the global cash crunch, and the momentum taken by new market technologies and disruptions soars breathtakingly. More capital is being acquired via private placements than public offerings, thanks to the creation of new platforms to solve demand. For blue-chip companies’ securities, these are easily traded off exchanges at the same volumes as on the companies themselves. These disturbances continue to soar with technological innovation, and they combine to render regulators clueless regarding what must be done as they, also, try to assert their authority in the new capital markets environment. Securities regulators have reacted to such disruptions by technology in either of the two ways, according to Chris Brummer: not to do anything or embrace laughable “concessions,” such as Twitter discovery and the nod given to tweets as a means to engage investors.

Coming up with an abstract outline for countering technological disturbances requires flexible analytics to provide for and assess various and unique market ecosystems while considering policymaking goals and the mandate of regulation. In turn, it becomes vital to abandon customary conjecture regarding the way to operationalize regulatory framework.

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. The advanced securities policy should accommodate the automated financial markets that have given a new meaning and function to 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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