Proceedings

policy of developed countries. It was determined by the internationalization of
markets generated an increased competition in the financial system and a bigger
fluidity on the capital markets.
Augusto de la Tore and Sergio L. Schmukler (2007: 120) have established a relation
between the stock market internationalization and the stock market liberalization.
They have shown that before the moment of stock market liberalization, the average
market capitalization of international firms/GDP was of 1.8%, after this moment, the
average increased to 7.7%.
The concept of de-regulation does not imply giving up rules and regulations (at least
not in totality). The capital markets stay regulated, being organized markets. A clear,
precise, complete and stable set of laws is a necessary premise to ensure the future
development of the capital markets. De-regulation has stimulated the financial
innovation, but sometimes, excessive rules were the starting point for creating new
financial products; in some cases, the „battle” between the financial intermediaries and
the regulating authorities of the financial markets lead to a process of re-regulating.
Important technological progress assisted the financial innovations in the process of
developing the capital markets. The development of the communication system
increased and made the speed of transmission of the financial information in the world
much higher. The lack of information was reduced and the geographical distances
became less significant for the investors. The technological innovation also influenced
the transaction methods, the online brokerage services, the real time payment systems
and many other systems and services.
All these innovations lead to the reduction of the transaction costs and to the
improved liquidity of the capital markets.
Augusto de la Tore and Sergio L. Schmukler (2007: 121) have also analyzed the
relation between stock market internationalization and reforms and have shown that
the market capitalization of international firms/GDP has increased after the
introduction of the electronic trading platform from an average of only 3.1% to an
average of 14.4%.
3. THE IMPACT OF FINANCIAL INOVATION ON THE DYNAMICS
OF MARKETS
The financial innovation made it possible for the investors to manage better their
portfolios in a very volatile environment. On the other hand, beside the obvious
advantages, the new financial products, the new financial markets brought with them
new risks for the investors and new challenges for the regulating and supervising
authorities.
At this moment, we consider that the main characteristic of the new financial
instruments is given by the fact that they allow the separation of characteristics and
risks and their combination in very new and diverse ways. This gives the investors
and the ones demanding loans the possibility to keep the wanted characteristics and to
give rid of the ones they do not want. Therefore it is possible to have a much
diversified lot of instruments that include all possible combinations of the
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