Journal Detail

Journal 14 – Market Imperfection

September 2005

This issue of the Journal aims to highlight some of the challenges facing the financial services industry in its ambitions to become efficient and discuss ways in which a number of them can be better met.

The financial services industry faces a number of challenges in its ambitions to become efficient. There are currently a lot of frictions that prevent our industry from operating at levels of efficiency that we all hope for and are somewhat attainable in other less regulated industries. These range from legacy systems that prevent different divisions of the same financial institution from communicating effectively with one another, to lack of generally accepted communications protocols that allow for seamless transactions with counterparts, to the tremendous number of regulations and regulators monitoring these institutions, to the highly complex markets and instruments that they deal with.

This issue of the Journal aims to highlight some of these challenges and discuss ways in which a number of them can be better met. In Section 1 we deal predominantly with how financial institutions can work towards achieving STP. Section 2 looks at a number of different markets, examines the levels of efficiency in each, and describes how they can be made more efficient. Section 3 looks at the largest friction facing our industry — and any other industry for that matter — regulation. In this section we highlight some of the major new regulations introduced, analyze how the new global regulatory architecture is evolving, and assess how they will impact global institutions.