| dc.description.abstract | The stock market came into existence as a platform where investors and businesses could interact for
the exchange of needed capital. It enables companies to raise capital for a fraction of their ownership.
This ownership is transferred by the issuance of stocks to investors. Currently, stock exchanges are
the platforms that aggregate buyers and sellers who want to trade in different classes of assets like
stocks, bonds, commodities, options, etc. When the first exchanges opened, brokers controlled them
as both members and owners. The exchanges were run as quasi-non-profit clubs or utilities to support
their members and had a monopoly on liquidity as the brokers controlled the access. Investors were
provided access to markets in exchange for the brokers who earned their commissions and received
trading fee rebates from the exchange. At the time, brokers competed based on service and
relationships rather than price. For the brokers who earned their commissions and received trading
fee rebates from the exchange. At the time, brokers competed based on service and relationships,
rather than price.
In 1975, the US introduced negotiated commissions for brokers, which marked the beginning of
constantly increasing competition and challenges, and the process has accelerated in the last 10-15
years. This development led to capital markets experiencing a revolution driven by technology and
radical changes in market structure.
Electronic methods of trading dramatically increased trading volumes and liquidity. It also slashed
the cost of intermediation and broadened access to markets. Access to liquidity was thus redistributed,
and it became fragmented among exchanges, alternative trading platforms and so on. Exchange
“specialists” or market-makers disappeared. The US and UK markets are pretty much the
experimenting ground for the securities industry worldwide. | en_US |
