Institute for Development and Research in Banking Technology
ROLE OF INFORMATION TECHNOLOGY IN STOCK MARKET
REGULATION AND LINKAGES WITH BANKING SECTOR
By Mr. G.N. Bajpai, Chairman, SEBI
The scientific breakthroughs in the finance theory have, in the second
half of the 20th century, shaped and are shaping the extraordinary
innovations in the financial world. Initially, technology was driven
for most part by crisis or natural extensions of business. New
financial products and changing market designs, improved computer
and telecommunication technology, have led to dramatic and rapid
changes in the structure of financial markets and institutions.
Technology has since taken over the driver’s seat and modulates not
only the quality of infrastructure but even the product designs.
Joseph Grundfest of Stanford Law School had aptly said that “The
securities industry is, in many essential respects, an information processing
industry.” Beginning with the trans-Atlantic cable that linked the
London and New York market for foreign exchange, a series of
technological innovations have led to titanic shifts in securities
industries transforming not only patterns of financing but also the
regulation and governance of all
institutions
that provide
infrastructure for financial flows. Perhaps, the most significant
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Institute for Development and Research in Banking Technology
development is the way technology has erased the geographical
boundaries, even creating new alternatives. The rapidity of changes
would shake even Rip Van Winkle, if he goes to sleep just for six
months.
Securities markets and banking system are the two sides of a coin
called “Financial System”. Any effectual sign of any side would
drive to the destruction of the system. History testimonies that the
evolution of banking and regulation were preceded by the invention
of securities markets and Central Banks were set up for its
superintendence and to serve a variety of objectives commencing
from pay