The arguments in favour of regulation of the financial market all revolve around safety and creating a fairer environment for everyone to work in. Making sure everyone adheres to the same rules goes some way to levelling the playing field. Those who argue against stricter rules cite the rising costs of compliance, increased illiquidity in the market as companies narrow their portfolios to less risky options, and difficulties concerning leakage of key information as a result of more detailed reporting requirements.
In order to survive, the market must be able to encompass greater regulation as well as the new challenges that this presents. Fortunately, once the solution to a problem becomes a highly prized commodity, the natural behaviour of a healthy business environment is adaptation. The first companies to provide ways to surmount current problems will be the most successful and this motivation drives innovation.
Algomi news – a good example
A good example of the above is the way that Algomi’s software solutions help users to be compliant with Markets in Financial Instruments Directive (MiFID ii) – the EU legislation that regulates firms who provide services to clients linked to ‘financial instruments’. At the same time, Algomi provides them with a higher standard of data for trading.
Regulation often requires transparency so that the journey of any trade can be traced from its genesis to the final transaction. A program like Synchronicity from Algomi shows the initial investigations and the ongoing trail up through to the eventual sale. All of this can be presented for compliance purposes. However, while the trader is in the initial stages of exploration, confidentiality is maintained. The overall result is an ingenious adaptation to increased regulation.
Algomi news – will deregulation help?
While the conversation about regulation and illiquidity in the market has been long, there does not seem to be an increase in the volume of players calling for deregulation. This is probably because the market has already adapted and shown that it can do so. This includes development of financial technology, diversity, and a shift in focus. Changing the landscape again now could mean as much disruption as that caused by the original regulations.