The present day financial markets such as stock market continue to experience technological revolution since 1990’. Innovations in technology such as software, computer processing, evolution of the internet and telecommunications join, forming information economy (Zoltan 55). Regulations in the financial sectors on the other hand seek to establish price structures that are able to enhance economic efficiency and equally promote fair completion amongst the various stakeholders. The regulatory reforms in the financial sectors such as the stock market seek to reduce the cost of information asymmetry through acquiring information and giving operators incentives to enhance their performance (Levine 48). This paper discusses how regulation and advances in technology reshape the global stock market.
Impact of advances in information technology on stock market
The small companies are able to compete with the big companies in the stock market since they are able to create and develop their web pages; many businesses are therefore continuing to log on and create their own web pages. It is noteworthy that information technologies enable companies to improve their market value. The smaller companies in the stock market for example can enhance their market value through the internet services due to the increased accessibility to the potential investors and the global market. Analysts predict that information technology oriented companies in the stock market will influence the growth within the stock market (Zoltan 65).
Information technology improves investor growth since the internet creates global availability of information due to the global internet coverage and access. New and emerging stock market forecasting mechanisms such as streaming of the stock prices and the publications of the financial statements of various firms and corporations by use of the World Wide Web continue to characterize the stock market (Zoltan 42). The advances in the information technology therefore enhances the participation of investors in the stock market since engaging in the stock market it is easier and cheaper due to the availability of information required by the investors to make informed investment choices and decisions. The advances in technology have equally made it possible for investors to trade in the stock market on their own and not to rely on the services of brokers or other intermediaries.
Impact of Regulation on the stock market
The introduction and reform of regulations serve the purpose of responding to unanticipated alterations and changes in the stock market and other market forces. For example, in the year 12973, the quadrupling of the world oil prices by the OPEC prompted the United States policy makers to impose regulation on oil prices. Such financial decisions affect the stock market because in this particular case the United States oil production and access to the refiner in relation to the price-regulated crude oil became a source of capital gains while foreign refining of the crude oil became a source of capital losses (Levine 70).
It is important to note that the near-collapse of global financial system witnessed in 2008 and world credit crisis experienced thereafter caused the increased calls for reforms in regulatory system. The regulatory reforms also seek to enhance predictability, transparency, credibility and legitimacy for any regulatory mechanism. The regulatory reforms in the financial system focused on improving the resilience of financial sectors (Levine 52). The reforms aim to ensure better and higher quality capitals for example common equity that have better features of loss absorption. The regulatory reforms provide better risk recognition in the global stock market as well counterparty risks and non-risk oriented advantage ratio as a security mechanism.
In conclusion, It is important to note that the advances in information and technology has an enormous impact on the on the stock market exchange because information technology boosts investor growth, the soaring of technology in the stock market and information technology reduces the necessity of personal investment brokers. It is also important to note that domestic and international considerations of reforms seeking to rectify the failures, deficiencies and enhancing stability of the global and domestic financial system shape the regulatory reforms (Levine 67). The main aim is to promote less risky financial systems or better-cushioned financial systems thus ensuring a sustainable and strong economic growth.