New Speeds of Competition : Transaction Speed Risk in the Financial Sector
The past 30 years has seen a genuine technological revolution that has ushered in numerous changes in the financial markets and in the real economy. Increased data processing capabilities, real-time access to information for an ever larger group of investors have brought many benefits to the global economy. While they have boosted competition and made operations swifter, they have also introduced new categories of risk. With the growth in competition and information processing speed, the size of financial institutions and, especially, the speed at which decisions are made has increased as well. As a result of the growing scale of operations of financial undertakings and competition that goes beyond local markets, decision making has had to become faster. This paper shows what processes have been driving the increase in decision-making speed and demonstrates the effect of that speed on the level of risk in the financial system and the consequences for the economy as a whole. (original abstract)
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