Deregulation is the process by which rules and regulations are removed or reduced in order to make markets increasingly efficient. The rationale behind this is that deregulation will promote competitiveness, and therefore result in lower prices and a more efficient marketplace.
To realise the effect of deregulation and technological advances on financial markets, we first have to understand what financial markets are. Basically, a financial market is a mechanism that allows people to buy and sell financial securities, commodities and other fungible items of low value at low transaction costs and at prices that reflect the efficient market hypothesis . Deregulation and technological advances go hand-in-hand; as deregulation became increasingly common, technology was also quickly advancing to become what it is today.
One highly regulated financial market before the 1980s was Japan. However, due to an agreement between the US and Japan in 1984 to liberalise Japanese financial markets, the rapid deregulation helped to strengthen the Japanese Yen and in turn helped to sustain capital flows to the US market and prevented an unwarranted weakening of the US dollar. Another huge instance of deregulation was the introduction of the Euro on 1 January 1999. The capital market was given a massive boost by reducing the costs and risk of transferring money between the European countries that adopted the currency.
With technological advances and the increasing use of the Internet, financial information on foreign investments and markets is accessible at the touch of a few keys. Financi...
... middle of paper ...
...them to have a larger reach of shareholders. Investors also can diversify their portfolios with stocks from companies in different countries, increasing the chances that the other stocks in the portfolio are able to buffer a loss due to a drop in the stock prices in one country.
However, all this does not come without its demerits. Because information is transmitted so quickly, it can reach some faster than others. Technology is not perfect, and this is when arbitrage opportunities can occur. When stocks are dual-listed, the risk of these arbitrage opportunities can increase.
In conclusion, I feel that financial deregulation, coupled with the rapid advancement in technology has opened up many doors to the expansion of the financial sector. Without the deregulation, markets will not be as advanced and as efficient as they are today.
Need Writing Help?
Get feedback on grammar, clarity, concision and logic instantly.Check your paper »
- Financial Markets and the Risks They Run Outline the differences between a broker and a dealer (or marketmaker) in financial markets, including discussions of how they are remunerated and what risks they run. A financial market consists of diverse financial assets traded between buyers and sellers. In addition to enabling exchange of previously issued financial assets, financial markets make possible the borrowing and lending by facilitating the sale by newly issued financial assets. Examples of financial markets include the New York Stock Exchange (which is involved in the resale of previously issued stock shares), the U.S.... [tags: Financial Markets Institutions Finances Essays]
415 words (1.2 pages)
- Ibors, financial benchmarks Ibors are interbank interest rate financial benchmarks that are used by financial markets as well as institutions to regulate securities. A benchmark is a standard which a security’s performance is measured against. Stocks and bonds are usually measured through indices. The Ibors benchmarks have been misused by the financial system of some countries and do not give the actual condition of the market. Banks required getting loans from one another to meet the set reserves and to operate hence they collude to manipulate the Ibors (Connor, 2014).... [tags: Bank, Central bank, Foreign exchange market]
1013 words (2.9 pages)
- Legends of the Mississippi and South Sea Bubbles have endured today as warnings against the fatality of irrational exuberance in financial markets. However, as details of these first financial crises are somewhat exaggerated, it has proven difficult for historians to separate fact from myth. The question remains as to whether investors behaved irrationally or sensibly in response to these events in the early eighteenth century. It appears that a lack of investor sophistication and the adverse effects of herding are partly to blame for the unsustainable prices increases.... [tags: Financial markets, Financial Crisis]
2431 words (6.9 pages)
- ... A particular insight can be drawn from the United Bank of Switzerland (UBS) report of 2008 which showed how employees were compensated with strong incentives to use UBS capital to invest in high yielding mortgage-backed securities. Whilst this was, they failed to provide sufficient incentives to protect the company, hence, mismatching priorities. This would not have proved costly if only the senior managers of the firm were wise enough to put in place strong risk measurement and control system.... [tags: financial crisis, housing and mortgage crisis]
1358 words (3.9 pages)
- 1.0 The Global Financial Crisis and Its Impact The recent Global Financial Crisis (GFC) initially began with the collapse of credits and financial markets, which caused by the sub-prime mortgage crisis in the US in 2007. The sub-prime mortgages were given to high-risk lenders (with bad credit history) who were in danger of defaulting, which eventually caused a global credit crunch, where the banks were unwilling to lend to each other. In October 2008, the collapse of the major financial institutions and the crash of stock markets marked the peak of this global economic slowdown (Euromonitor International, 2008).... [tags: global economic slowdown, financial markets]
1807 words (5.2 pages)
- LITERATURE REVIEW There are too many studies about crisis because crisis are experiencing anywhere and anytime in the world. I have scanned many articles about types of crisis and examples of them. There are too many article but I can’t found any containing two of them together. There are too many research resources but they are very scattered. Almost all of them are post graduate level. They are hard to understand as a sudent at the graduate level. There is a sample article by Güven Delice. Title of article is Financial Crisis: Theoretical and historical perspective.... [tags: crisis, financial markets, suppliers]
1804 words (5.2 pages)
- Financial Management and the Markets Businesses both large and small have competing priorities. Consumer demands, regulatory concerns, shareholder interests, and employee relationships all require attention from the business perspective. However, one of the highest priorities for any business is financial management. It is difficult, if not impossible, to meet the needs of a business without an adequate cash flow. In the short-term, financial deficits can be only a bump in the road, however long term cash flow difficulties indicate further intervention is needed.... [tags: Economics, Finance, Investment, Cash flow]
1121 words (3.2 pages)
- CHAPTER 2: FINANCIAL MARKETS AND INVESTMENT PRODUCTS 2.1 Need for making investments to reach retirement goals 2.1 Need for making investments to reach retirement goals The retirement goal is unique in the sense that it requires a large corpus to be built out of owned fund since it cannot be funded through loans or borrowings. The other feature of the goal is that it is long-term in nature. It has to be met at a time in future. If the money saved for the goal was kept unused till it is required to meet the expenses in retirement, the money will lose value given the long period to retirement.... [tags: Investment, Finance, Capital accumulation, Bond]
927 words (2.6 pages)
- The launch of stock index futures is a milestone in the development of Chinese financial markets. In the past few years, Chinese stock market was characterized as one of the most dynamic developing markets, and also the most volatile one. It rose about 97 percent in 2007, then plunged more than 65 percent in 2008 and rebounded about 80 percent in 2009. The investors and regulatory authorities hope that introduction of stock index futures trading will help increase liquidity in the stock market, reduce market fluctuations and hedge risks.... [tags: Economics]
618 words (1.8 pages)
- Financial Instability The soaring volume of international finance and increased interdependence in recent decades has increased concerns about volatility and threats of a financial crisis. This has led many to investigate and analyze the origins, transmission, effects and policies aimed to impede financial instability. This paper argues that financial liberalization and speculation are the most reflective explanations for instability in financial markets and that financial instability is likely to be transmitted globally with far reaching implications on real sector performance.... [tags: Financial Market Finances Accounting Essays]
3554 words (10.2 pages)