Regulatory and institutional impacts of securities market computerization

Advances in information technology have brought new ways of structuring, operating, and supervising securities markets. The Bank's policy advice in institutional reform of securities markets should reflect awareness of the opportunities and problems this presents. As a guide to best practice, the author provides basic operational and policy tools that take account of the importance of information technology in two securities market functions - trading, and clearance and settlement. He suggests that information technology systems pose new technical problems for market supervisors and can affect the rights and obligations of market participants. He provides policy principles that take these factors into account, to guide the planning, evaluation, and supervision of trading and clearance and settlement systems that include an information technology component. He explains how the processes and functions of a securities market can be performed in a variety of ways, using both manual and information technology approaches. Highly sophisticated information technology systems are not always necessary or desirable, but the well-planned use of information technology can improve a security market's efficiency, fairness, and stability. Clarity of objectives, good planning, and a clear grasp of operational implications are important in effectively evaluating proposals for developingsecurities markets with an information technology component.