Information Technology in the Major International Financial Markets

Abstract

Financial markets perform a seemingly simple function: facilitating the transfer of securities into cash, or cash into securities. Closer inspection of the activities and the information intensity of a trading floor or a dealing room reveals great complexity. Information technology (IT) plays a crucial role in supporting maker activities, and no trader today could operate without real-time data services, and computer-based analytical tools. Market information - about prices, interest rates, transactions, investor supply and demand, and company and economic news - is at the heart of any trading operation. Consequently, the major international markets from Tokyo to Zurich are making increased use of information technology. While IT is capable of making physical marketplaces and trading floors obsolete, no consensus is emerging on the design of an integrated global financial market, and many technological and regulatory issues remain unsolved. Multiple, fragmented markets may be a consequence of the lack of coordination. This chapter highlights the technologies that are revolutionizing international financial markets. The future direction of financial markets will be charted by automation and systems, and IT'S influence on banks, securities firms, and the markets themselves will continue to be a subject of debate and controversy.