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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. One of the obstacles pertains to the diverse conduits through which new technology upsets market practices. Making matters worse, there’s a popular understanding that stable gatekeepers, for example clearing systems and broker-dealers form the backdrop for the operation of securities regulation. 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. Better equipped private entities and sites are now providing brokerage and facilitation for capital market liquidity, with public offerings playing an insignificant role, which is easy to explain against the backdrop of inconsistent reforms to capital raising regulation.

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. Concerning high-quality stocks, they’re easily being traded via exchanges as much as through the firms themselves. Such disruptions keep accelerating with technological advancement, and collectively, they’ve left regulators without any effective response as they, too, attempt to determine their role in the new financial markets ecosystem. Chris Brummer asserts that securities policymakers have responded to the impacts of innovation by either adopting a “hands-off” approach or agreeing to “comical” compromises, for instance the use of Twitter and acceptance of tweets as a means with which to communicate with investors.

To create a theoretical framework for handling disruptive technology calls for flexibility of insights to enable the accommodation and scrutiny of distinct and dynamic market environments against growing sets of regulatory responsibilities and policy objectives. As such, there’s the critical need to avoid traditional suppositions about how regulatory policy gets to function.

To optimize the influence of securities regulation, improvements are required to match a computerized (and typically digital) securities market microclimate undergoing change at rapid rates. Any such upgrades to securities rules have to address the computerized financial markets that have altered the understanding and operation of 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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