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Business Can Learn From Financial Innovation
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This is about high finance and deals with the
mechanisms of the financial industry and trading. Although it explores the way the freeing
of financial information has challenged the way banks, brokers and other financial
institutions operate, it is still entrenched in the idea that information should be less
than transparent. The authors recoil with some horror at the suggestion that the ECN
matching service is somehow better than the carefully manipulated markets created by
specialists and market makers.
Information wants to be free and this central
tenant lies at the very foundation of the changes in the financial industry, and in
trading, in the last decade. It appears that what business can learn from this financial
innovation is threefold.
The use mechanical systems to replace people where the exchange of information is more
important than the development of a relationship. The line at the bank teller is a good
example of this.
The use of patents and copyright on intellectual property developments that are designed
to restrict the flow of information, solutions and techniques in an attempt to retain the
status quo. Action by recording companies against Napstar is an example.
The protection of existing relationship managers that are also profit centers at the
expense of greater transparency and friction free financial services. This keeps the grit
in the system. Market makers, and off market institutional transactions are good examples.
The book delivers little about the business
of trading but it tells a lot about the thoughts of those who have, in the past, had a
significant say in the structure of financial markets. Their interests do not parallel or
compliment the interests of retail traders and this book does a very good job of
demonstrating this. This is background reading for the market.
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