Capital Market Revolution

As the cover of this book says: Liquidity! Accessibility! Transparency!The authors take a European perspective to challenge the traditional way that financial markets have operated in the United States and elsewhere. They point out, correctly I think, that the revolution is here. Fully automated markets now do the bulk of the worldwide futures trading. For example the Chicago Board of Trade was overtaken in futures volume by the fully automated German-Swiss EUREX in Frankfurt in 1998. London was charging from behind to take a big piece of the automated futures business as well. Automated trading experiments are going on in a number of other places, as well. The vision the authors have is captured by a quote from Ludwig von Mises: "Economic history is the story of the gradual extension of the economic community beyond its original limits of the single household to embrace the nation and the world."This vision is essentially of convergence into one global market, with one clearinghouse, and one regulator to do everything. The need to get costs down will require that convergence as the ultimate solution. How imminent this vision is has to be a guess (the authors convey the vision in the form of a dream), but the stories in the book show how often the complacent, traditional view has been wrong. The authors are good at pointing out the speed bumps that will delay progress, and outline good ideas for better and faster implementation. But they are definitely tolling the bell in the near future for face-to-face selling. "In the future there will only be electronic traders." They also see a rise of small traders, small banks (doing direct placements of IPOs over the Internet with traders without underwriting syndicates), and greatly squeezed paychecks for traditional investment banking and trading activities. I found the book to be consistent with my own vision. I was still left with the question of why the transition has not been a faster one. Financial markets should be converging at a much faster rate, if one looks only at the technology and the use of the Internet. Which aspects of human stalls are the worst delayers? Probably the tradition and bureaucratic stalls, because the existing markets and regulators are very slow to see new opportunity. Consider how recently fixed trading commissions disappeared. Those should have been gone in the Roaring Twenties. If you want good detailed information on the state of the electronic market revolution, this book is essential reading. If you own a seat on an exchange, your pocketbook requires immediate attention.There is an excellent section on how to prepare for the transition, and another one on the dangers to be cautious of. Good look in building your wealth faster through more efficient markets!

In reading the book, there are many things that would scare traditionalists in our business. The rules are changing, and unless we adapt as traders and exchanges, we will be doomed. As I have discussions with other board members, and other floor traders, some intuitively understand the coming electronic age. Others pass it off as a purely European phenomena. "It won't happpen here.", is a phrase I hear every day. Brokers and traders see that the computerized competitors are having a tough time gaining a foothold in the American futures market. They rest thinking that their future is secure, and that maybe their margins will be squeezed a little. The revolution has only begun. While some of the positions the book posits seem outlandish, Columbus was seen as outlandish in 1492 too. This is a must read for any person associated with floor trading or an exchange. This also makes good reading for anyone involved in government regulation. Barriers are being broken down. Borders set by politics are not relevant to the sea change taking place in the financial marketplace. The U.S. is the titan of investment capital today, but a government that shackles the growth of the marketplace due to over regulation, is doomed to see all that capital leave for less regulated environs. I am on the Board of Directors at the Chicago Mercantile Exchange, so I speak from experience. The revolution has begun, and we are trying to embrace it.

Building on the monthly news and insight from Patrick Young's ADTrading.com newsletter, Patrick Young and Thomas Theys have put together a concise history of recent developments in capital markets, especially the futures markets, and the steady advance of electronic trading. As a longtime reader of the newsletter I have been exposed to most of these ideas on a monthly basis; as an industry executive I have watched the events unfold day by day. Nevertheless, this compilation provides fresh insight into Capital Markets trends.I recommend this book to anyone interested in an overview of the recent history of the futures, equity and FX markets and a plausible view where the markets are heading. I would also recommend Capital Markets Revolution to industry insiders who are well aware of the events and ideas discussed, as they can benefit from the framework and view of the future into which current events are placed.

Following a concise and accurate history of the markets last 2-3 years and the possible developments that may effect participants in the markets.This book is worth a read, by anyone interested in the markets.I'm only sorry that I think the political aspects of these changes not happening is not addressed.

Patrick Young looks into his magic eight ball and reveals what the future holds for the financial markets. Very radical and probably very acurate. A must read for those traditional brokers who are contemplating a second house in the Hamptons