13 - The Future of Financial Markets

Abstract

This chapter explores several trends and their impact on financial markets. Technological advances have allowed exchanges to replace the century old floor-trading model with the electronic trading model. The market function of all these players will undergo a dramatic transformation as they adapt to the new market structure, new products, new trading models, and increasing regulations. There are significant opportunities for further consolidation in global financial markets, including in North America and Europe, where consolidation is under way for several years. The recent emergence of new upstarts shows that the established exchanges will continue to face pressures from new electronic platforms that will keep the overall trading cost low and innovation healthy. The rise of automated trading as well as the globalization of financial markets has produced a tremendous surge in volume across all asset classes. The increase in volume and the number of new listed products have also increased the amount of electronic information sent to and from the exchanges. Exchanges around the world are updating their electronic trading platforms to provide fast and reliable systems to clients. The new financial markets will be dominated by concerns over transparency and speed. Intense competition in the coming years will help shape the global financial markets for the next century.