Edited by Geoffrey Poitras
Chapter 3: From the Renaissance Exchanges to Cyberspace: A History of Stock Market Globalization
Geoffrey Poitras The revolution in computing and communications technology that began in the 1980s has produced a radical realignment of traditional financial institutions. Ex post, the patchwork framework of regulatory oversight has proved incapable of adapting to these changes, resulting in systemic instability in the globalized financial system. Lessons gained from centuries of historical development are being ignored (for example Neal and Davis 2005). The current public debate on financial market reform reflects confusion about essential properties of trading stock in ‘cash’ and derivative security markets (for example Pirrong 2008 and CFTC 2008).1 One of the casualties has been the collapse of the self-regulating, mutual form of centralized stock exchange organization, which has been replaced by a dispersed, demutualized opaque network of electronic trading networks (ETNs) and automated trading system (ATS) platforms (for example Markham and Harty 2008, and Chapter 12 in this volume; Kumpan 2006; Treptow 2006). The crude rationale given by regulators for such fundamental changes, and the relatively limited associated public debate, is disturbing.2 Counterproductive regulatory arbitrage, fragmentation of market liquidity and undermining of the price discovery and dissemination function of important financial markets have been some implications of the changes. Despite being fundamental to the market economy, the history of the globalization in trading for stocks and shares has received relatively limited academic attention.3 The connections between public property rights, government regulation, exchange ownership, composition of the trading population and pricing efficiency have been generally ignored. Basic questions about the evolution of exchange trading remain...
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