Why Securities Regulation Requires Upgrade to Match Disruptive Technology
Professor Chris Brummer argues that disruptive innovation has affected financial markets the most, despite scholars and policymakers not having a uniform grasp of the observable fact, much less a consistent set of regulatory solutions. Partly, the challenge emanates from the numerous ways by which invention upends trade activities. 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.
Today, securities regulation continues to experience more profound obstacles, as unprecedented scope of technological advancements continue to upset the market microstructure helping drive 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. Today, the money raised in private venues surpasses public offerings courtesy of the fresh tools developed to match demand. Concerning high-quality stocks, they’re easily being traded via exchanges as much as through the firms 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 advanced securities policy should accommodate the automated financial markets that have given a new meaning and function to market liquidity. Private markets behind the development of a continuously-surging array of choices to facilitate security offerings and exchanges should also never be left out.