Latin American Capital Markets

GLOBALIZATION.TECHNOLOGX AND REGULATION IN CAPITAL MARKETS 59ulatory functions. SROs are closer to the industry; they are more flexible and thereforehave several advantages. Oversight by congress and the securities commissioncould help resolve the conflict of interest problems.Strategic Issues and RecommendationsCompetition among exchanges is heating up on a global scale. Securities markets areundergoing tremendous changes. It is not clear who the winners will be five yearsfrom now. Will the traditional stock exchanges survive? How will the role of exchangesbe modified? What additional value-added services will they provide? Willevery country have a stock exchange, and does every country need a stock exchange?How will exchanges in Latin America and the Caribbean compete with the big players?Will there be regional markets? It will be interesting to see what kinds of alliancesand partnerships become fruitful and how consolidation in the industry shapes up.Emerging markets should have a strategy in order to compete in the globalmarketplace. Integration in the global system is a fact; the issue is how best to preparefor it. Regulators must encourage the development of strong, competitive markets.They must continue to encourage innovation and foster competition at the internationallevel. International cooperation is a necessity. The risks of financial failurewill not be borne by one country alone, as is evident from several examples (such asBarings, Long-Term Capital, and the Asian crisis). Risk management and monitoring atthe global level are required. The consolidated risk of financial intermediaries andtimely dissemination of information are needed. Regulators need to share informationin order to carry out effective surveillance and enforcement and achieve harmonization.Harmonization does not mean that each country would lose its legal and regulatoryidentity. However if the standards of emerging markets are perceived to beweak relative to those of developed countries, integration might be difficult.This section identifies key questions and recommends a strategy related to thethree broad issues discussed in this chapter: globalization, technology, and regulation.GlobalizationWhat are the benefits of globalization, and how can the region exploit them? Globalizationhas brought a number of benefits to local markets. For example, many companiesin the region have successfully raised capital in other countries.The stocks ofLatin American companies have generated considerable investor interest and havebecome some of the most actively traded stocks, even in New York This in turn hasCopyright © by the Inter-American Development Bank. All rights reserved.For more information visit our website: www.iadb.org/pub