Creating Securities Markets in Developing Countries: A New Approach for the Age of Automated Trading.

The past decade has been one of enormous change in the securities trading industry. Automation of trading systems, led by the continental European exchanges and US "electronic communications networks" (ECNs), has resulted in significant declines in trading costs, massive increases in turnover, internationalization of trading and settlement system operations, and major reforms in exchange governance. Yet the policy advice given to developing country governments looking to create or expand securitized finance in their markets has been largely unaffected by these developments. This is unfortunate, as developing countries now have the opportunity to leapfrog the evolving infrastructure of the mature markets and to define the global efficient frontier in trading technology, exchange governance, investor access and market structure regulation. This paper analyses the technological and economic forces driving change in the securities trading industry, and examines the implications for developing markets. Copyright 2001 by Blackwell Publishers Ltd.