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Information Technology, Financial Flows and Globalisation

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Charles Schwab opened 1.4 million new accounts in 1998. with 5.6 million active accounts. the number of on-line transactions has averaged 93,000 a day during 4Q/98 ... – PowerPoint PPT presentation

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Title: Information Technology, Financial Flows and Globalisation


1
  • Information Technology, Financial Flows and
    Globalisation
  • Stephen Cheung
  • Research Consultant
  • Securities Futures Commission
  • Hong Kong

2
Technology
  • lower transaction costs
  • reducing asymmetric information
  • 24-hour trading
  • borderless global trading network
  • improve market efficiency

3
Institutionalisation of Funds
  • transactions costs
  • financial products
  • trading strategies
  • cross border capital flows
  • regulatory and tax issues

4
Technology-driven Competition
  • high speed
  • low costs
  • reduces the geographical importance
  • abandon open outcry
  • adopt screen-base trading system

5
Technology-driven Competition
  • real-time information
  • low-cost trading
  • risk management system
  • level playing field

6
Internet Trading
  • 100 on-line brokers
  • 25 of all trades on NYSE and Nasdaq
  • 14 million by 2002

7
Internet Trading (cont)
  • Charles Schwab opened 1.4 million new accounts in
    1998
  • with 5.6 million active accounts
  • the number of on-line transactions has averaged
    93,000 a day during 4Q/98
  • 61 of the total transaction

8
Internet Trading (cont)
  • the traditional role of brokers on trade
    execution will diminish
  • technology creates level playing field for
    investors, issuers and brokers
  • the role of traditional exchanges will be
    undermined
  • new challenges for investor protection
  • regulatory issues become global issues

9
Internet Trading (cont)
  • how safe is trading of securities on the Internet
  • temporary service breakdowns
  • spread of false information

10
Alliances and merges of exchanges
  • Capturing market share
  • improving liquidity
  • cutting costs
  • For example
  • CME, MATIF, SIMEX
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