The Evolution of Financial Markets
Table of Content
The Growing Accessibility of Financial Markets in the Digital Age
Financial literacy. Ever since the dawn of human civilization, it has been one of the most coveted and sought-after skills in human knowledge, and with good reason too. Being capable of understanding your finances can spell out the difference between prosperity and being out on the streets. Yet for all of its desirability, the skill has eluded most of those who’ve sought after it over the years. That is, until the modern age.
Thanks to the increasing advancement and development of cutting-edge technologies, financial markets have now become more accessible than ever before. With this new accessibility, financial literacy is now one of the most attainable skills out there. Numerous innovations within the internet and digital sector have enabled the everyday citizen to take part in the market in ways never thought of before. In this article, we’ll delve into a few ways how that has come to be—analyzing the ways in which certain market phenomena such as brokers, insider selling stocks, etc., have changed.
Charting The Democratization of Finance
The Dot-com Age
“The Democratization of Finance” is a term that has been coined to denote the increasing ability of average everyday people to play important roles in the financial markets of the world. Although not an official connotation, the phenomena the term is referring to can be said to have had its beginning in earnest during the so-called dot-com bubble of the late 80s and early 90s in the United States.
Thanks to the rapid increase of chip performance and a simultaneous decrease in size, computer technology and other digital devices saw a surge in mass availability across the country. Computers and phones were now cheaper and smaller than ever. This was compounded by the fact that more people wanted them.
During this age, participation in the markets by the everyday citizen mainly took the form of communication with your stockbroker. This was essentially an individual (or firm) that was licensed to buy and sell stocks and other securities via the stock market exchanges. Your broker would contact you, or vice versa, and proceed to discuss and inform you on any notable stock picks that they deemed to be opportune. Once the interaction had concluded, if the client had decided upon it, the broker would then initiate a trade in the markets on behalf of the client.
Unfortunately, during this age, insider trading also saw a spike in activity. Insider trading refers to the market phenomena of “inside” investors (i.e., those who occupy positions within the companies impacted by the trades) making “sure-fire” trades and investments based on fiduciary information. Financial corruption had reached a peak due to new technologies and a lack of regulations, and insider trading was the forerunner of the pack.
The Modern Age
Nowadays, thanks to even further technological developments such as smartphones and cryptocurrency, partaking in the financial markets has never been easier. Financial service apps, such as Robinhood, have risen out of the woodwork to offer everyday investors immediate access to the markets and their assets without having to go through the process of communicating with a broker in person.
Due to this, essentially anyone with a smartphone can lock in positions and partake in the market. This is supported further by the commission-free trading offered by a lot of these new platforms, meaning citizens can place their trades without having to put up any upfront trade fees for each transaction.
Unfortunately, in this age, insider trading still occurs and it (literally) pays to look out for it. Stay on top of company reports and meetings, and make sure you hedge your bets around any possible event that could shift the stock’s price in a direction. Illegal insider trading is far less common nowadays, but being keen on it will aid you in avoiding financial pitfall events.
Well, with that case open and shut, today we’ve delved into how exactly the financial markets of today came to be so accessible, and what that entails for the average citizen. We do hope that this article has been helpful in any endeavors you may have. Always remember to keep your head up and aimed towards the next goal!