Are financial intermediaries so crucial to well-functioning financial markets?
The traditional answer is that they provide liquidity and stability in the market so that buyers and sellers can make transactions at all times and in varying quantities at fair-market determined prices.
The new answer is that they can also create instabilities in the marketplace (programmed trading, as one example) that crash all trading. They can also create unfair trading practices (insider trading, as one example) which bias the market against legitimate buyers and sellers through price manipulations.
No comments:
Post a Comment