The New Capital Market Revolution: The Winners, Losers and the Future of Finance

Rating:
Summary: You say you want a revolution? Well...
Review: This high-pitched book takes on the task of describing the recent innovations in capital markets and of prophesizing where these innovations will lead. The premise is not overly complex. Internet has opened opportunities for new electronic trading systems, which are changing the way capital markets work. These systems will end securities exchange as we know it, since they will be better at matching orders. Brokers, it is argued, will lose a lot of their utility since the masses would have direct access to the trading process. Clearing business, in its capacity to insure that your trade settles even if your counterparty defaults, will blossom. New, nimble, electronic-only services will win the day.

In spite of the book's high aspirations, it fails to excite.

It lacks general appeal. The book allots vast majority of its page space to the argument that new electronic trading systems may force many pit traders to look for new jobs. This in itself would be important news for pit traders, but would hardly appear revolutionary to the general public.

The book decidedly lacks analysis. Will fully automated trading alone offer better access to capital for issuers? Will it enable a substantially different service for individual traders than Ameritrade, beyond just lowering transaction costs? Why are technological advances so different in different parts of financial markets (NYSE, for example, has had the Automated Bond System that started automatically matching orders since mid 70's)? Besides, innovation in financial markets is not new. Is introduction of ETFs (Exchange Traded Funds) indeed revolutionary compared to, say, index funds? How exactly are single-stock futures groundbreaking compared to other financial instruments? The book chooses not to reveal the arguments in support of its statements.

The book is rather poorly written. Many passages employ widely digressive language and never arrive to making a point. In addition, the frequent use of loud labels such as "Luddites" or "post-feudal marketplace" makes it especially apparent that the book relies more on the strength of words than on the strength of argument.

The parallels with French Revolution are ill advised. The cover displays guillotine, most famous as the weapon of mass executions during the Reign of Terror. One hopes that by extolling the virtues of revolution, the author is not suggesting Robespierre as his role model. Coupled with it, the red-and-black jacket most immediately evokes fascist symbolism. A regrettable oversight.

Finally, with its long-winded passages restating the same message and its propensity for strong statements not supported by much analysis, the book is quite tedious, especially for a book about a "revolution".