Latin American Capital Markets

INTERNETTECHNOLOGY AND THE DEVELOPMENT OF SECURITIES MARKETS 87However, because the Internet contains many unique characteristics—in particular,its accessibility and low cost—regulating securities markets in the Internet Agewill demand of regulators several new skills. As lOSCO's recent study illustrates, regulatorswill need to factor in Internet capacity, resiliency, and security concerns whenanalyzing the systemic risks their markets and market participants face. Regulators willalso need to decide how public Internet fora, such as Internet discussion sites—whichare, essentially, enormous global public squares where strangers meet to discuss theday's concerns—fit within the ambit of existing securities laws and regulations. Likewise,although regulators concerned about systemic stability have always paid attentionto widespread market speculation, Internet-facilitated day trading has combinedconcerns over speculation with issues of consumer education, hidden transactioncharges, and fears over growing personal bankruptcy. Securities law enforcement personnelwill need to learn new technical skills to track fraudsters through ISP addressesin much the same way that they currently track ill-gotten proceeds through bank accountnumbers. At the same time, securities regulators themselves will need to forgenew relationships with ISPs, just as they have done with the financial industry, if theywish to have ready access to the types of information they will need in order to prosecutesecurities fraud.Finally, perhaps the most important lesson developing market regulators cantake from the experiences of other regulators is that cooperation among regulatorsis a necessity if regulators hope to succeed at the vital tasks with which they arecharged. In the rapidly shrinking Internet world—where investors, issuers, and intermediariescan cross borders with ease—wrongdoers and fraudsters also can easilycross these jurisdictional boundaries to prey on investors and undermine the integrityof securities markets. Where scam artists set up shop in one jurisdiction while preyingon investors elsewhere, regulators will have to exchange information and assisteach other in their investigations in order to protect the integrity of all markets.As several studies have indicated, Internet use in Latin America is poised togrow exponentially. Latin American governments, some of which only recently havebegun developing robust securities regulations, will be thrown into the middle of anInternet revolution in capital markets.This revolution offers Latin America the opportunityto take advantage of technology to develop advanced capital markets that, inthe past, would have been impossible outside a few large cities in Europe, Asia, andNorth America. However, doing so will require Latin American regulators to combinethis new technology not only with the requisite physical infrastructure, but also withan appropriate regulatory infrastructure. One hopes that the lessons offered by otherjurisdictions will serve as a guide to future success.Copyright © by the Inter-American Development Bank. All rights reserved.For more information visit our website: www.iadb.org/pub