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Chapter 16 The New Economy: Implications for the Organization
and Structure of Securities Markets Technological changes have not introduced the hallmark feature of the new economy—network effects—to securities and derivatives markets. Network effects have always been present in these markets due to the centripetal force of liquidity. The increasing computerization of the trading process is having a profound impact on the organization of securities and derivatives markets nonetheless. In particular, whereas traditional noncomputerized methods made it desirable to organize financial exchanges as nonprofit firms owned and controlled by intermediaries, computerized exchanges are effi- ciently organized as for-profit, investor-owned firms. Moreover, the introduction of computerized trading changes the nature of competition between exchanges. |