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Democratization of markets

By NexChange
Capital Markets, FinTech

 fintechcash Average investors are big beneficiaries of morphing markets, financial technology (fintech) and more market information than at any point in history.  For ordinary investors, trading is more analytically sophisticated, faster and cost-effective ever. Markets are democratizing. Back in the day, average investors pretty much stuck to the stock market, or maybe a bond here or there. Their key strategy: buy and hold. Perhaps a father educated  his kids:
Sonny Boy, Girly Sue Sonny Boy, Girly Sue, lemme explain investing to you…  As a stock holder, when you get older, you’ll recall this chat about stock this and stock that…  You’ll remember I said with a grin, that these shares of RCA, or something akin, will be worth something then…  So, we are going to hold onto these goodies…  Someday, when “then” arrives, we’ll be rich, it’ll change our lives… That’s how wealth derives…  High fives!
Today, average investor strategies are dynamic and multifaceted with trading taking place on myriad venues (i.e., futures and options). Investors even purchase off-the-shelf analytics previously available only to institutional investors with quants. You want leading momentum stocks which have analogous history the same week over five years? Today, vendors can tell you, and much more. Admittedly, typical investors don't have quant cadres working on trading algorithms, (there's one 35,000-person institution with 1,500 such quants), but complex analytics are coming to average investor desks… and in a hurry. Furthermore, NexChange, the new financial services networking site, contains a bevy of beneficial information and data which until now, has never existed in one web location. Speed is also a new tool.  Average investors won’t be swift like high frequency traders and institutional investors which spend tens of millions to be quick.  However, there’s unprecedented hustle available to ordinary investors. Today, one broker’s television commercials boast money back guarantees‎ if trades aren't confirmed in a second! The last time I traded (prior to becoming a regulator) it took 30 minutes to confirm the request (and the price of the IPO rose $3). Speed today allows investors to take advantage of rapidly changing market conditions, providing those who use it with a fresh competitive advantage. Finally, transaction costs have fallen like a rock over the last decade. It could cost $75 to make a trade, but today, it can be done for less than $10. Slowly, but assuredly, markets are becoming more democratized. Will there constantly be the “haves” and “have nots” in markets? Sure, it will be that way to some degree. We all knew floor traders had advantages of watching and listening to every facial or voice nuance. However, for average investors, markets have morphed marvelously. That’s a categorically cool development. Bart Chilton is the former Trading Commissioner and is now a Senior Policy Advisor at the global law firm DLA Piper. He is the author of Ponzimonium: How Scam Artists Are Ripping Off America. Photo: FamZoo staff

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