Latin American Capital Markets

•CHAPTER 2Globalization,Technology, and Regulationin Capital Markets: Strategiesfor Latin America and the CaribbeanReena AggarwalThis chapter examines the current status of emerging markets with respect to theprogress made during the past decade. It analyzes key factors affecting the developmentof securities markets in both developed and developing marketsThese include:• Globalization and regionalization of financial markets and increased competition• The role of technology in creating new types of trading platforms and widespreaduse of the Internet in providing financial services• The changing regulatory structure for dealing with globalization, technologicalinnovation, and the changing structure of securities markets.The chapter raises key policy questions and offers strategies for capital market developmentin Latin America and the Caribbean.Capital markets allow for efficient capital raising and allocation of limited resources.Well-functioning primary and secondary capital markets provide issuers theability to raise capital and investors the ability to invest in diverse financial instrumentsat low transaction costs.This helps to lower the cost of capital for issuers so they cancompete globally; it also helps to increase savings that will be channeled into productiveinvestments.Thus, capital markets lead to overall efficiency and economic developmentand growth. They also play an essential role in improving corporate governance,disclosure standards, transparency in the marketplace, and accounting standardsThe optimal amount of transparency and regulation leads to credibility and thereforegrowth of capital markets. A sound regulatory framework is the cornerstone of vibranfinancial markets (box 2-1).Copyright © by the Inter-American Development Bank. All rights reserved.For more information visit our website: www.iadb.org/pub