CHAPTER 8

Globalization and Automation

Unfinished Business

Technology globalized the financial markets, making it possible for market participants to exploit alpha opportunities across international markets. The automation of trade processes and electronic trading permits market participants to replicate their strategies in new markets rapidly and at lower cost, enabling them to capitalize on market opportunities quickly, wherever they arise.

Globalization and automation are trends that are intertwined; their ­impact upon financial markets cannot be underestimated. By facilitating ­democratized access to global markets, automation is in large part responsible for the decentralized nature of many electronically traded markets today. As a byproduct of the greater access that it enables, the number of participants has increased and as a result, markets are arguably more liquid.

As Justin Llewellyn-Jones of Fidessa Corporation relates in this chapter, the trends have farther to run. Automation and a global structure are not characteristic of all markets. For firms that are active in multiple asset classes, the greater use of technology to optimize business processes in more markets has the potential to dismantle more barriers of entry and in the process bring about similar advances in market quality in new products as well.

Globalization requires more than just technology, though technology is a key component. Immense regulatory and other barriers in some markets, which include taxes, ...

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