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. It doesn’t help that many believe the function of securities regulation is backed by steady oversight, such as by clearing operations and broker-dealers. Evidently, how innovation affects twenty-first century securities markets calls for a review of relevant regulatory frameworks.
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.
Today, these advancements are the subject of tight scrutiny, considering the worldwide financial turmoil, and with market innovation and interference gaining traction extremely fast. Nowadays, private entities are outperforming IPOs in generating capital as more resources are built to process requirement. For blue-chip companies’ securities, these are easily traded off exchanges at the same volumes as on the companies themselves. These disturbances continue to soar with technological innovation, and they combine to render regulators clueless regarding what must be done as they, also, try to assert their authority in the new capital markets environment. 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.
Developing a hypothetical groundwork for addressing disruptive innovation demands perceptions with the versatility to address and study diverse and changing market conditions in light of soaring regulatory mandates and policy targets. 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. The new securities regulation must account for the automated financial services, which have redefined market liquidity and changed its mode of operation. It’s also important to address private markets that are building an ever-growing spectrum of options for security issuances as well as trading.