6
24-hour Trading
Financial products such as currencies and stocks are constantly traded in different time zones
When markets in London and New York are closed, trading goes on in Tokyo.
9 am
5 pm 9 am
5 pm
9 am
5 pm
9
History
Many financial systems, institutions and techniques have their roots in early Europe:
Products• bonds• shares
Techniques• forward trading• insurance
Institutions• exchanges• central banks
but not banks; bank-like institutions existed in other regions and eras too.
10
History
Studying how European financial systems evolved in time allows to develop an understanding of
• the reasons behind the development of financial products and trading techniques
• the driving forces of financial innovation
• the circumstances leading to the emergence of rules and institutions
• the determinants of the rise and fall of financial centres.
11
Diversity
European financial markets offer the opportunity
• to study a wide range of institutions and systems
• to learn about financial systems by comparing financial structures and characteristics in individual countries
• to learn to distinguish between
– bank-based and market-based systems
– universal banks and specialised ones
– strongly and less strictly regulated financial systems
– formal and informal ways of policy interference
12
Diversity
Studying European financial systems may help answering the following questions:
• Which alternatives do exist for building financial systems?
In recent history this question was of particular relevance to late industrialising countries seeking to adjust their financial system to the needs of the economy. One example is Japan which built its financial institutions in the 19th century after careful study of western financial systems.
Today this question matters especially to transition economies such as those of eastern European countries.
• How do financial structures, rules and institutions influence the efficiency of market outcomes?
For example, this refers to debates about bank-based versus market-based systems, the advantages and disadvantages of code-law and common law countries and regulation versus self-regulation of financial institutions.
13
Specialty
European financial systems are special in many respects:
EMU - the unique experiment in history
The euro ranks second in the league of world currencies behind
the US dollar
The European Central Bank is one of the world’s leading central
banks
The world’s largest financial centre is located in Europe
Europe has become the largest financial market worldwide with
the Internal Market Programme
It has a unique system of regional bank supervision
The centre of international financial supervision is located in
Europe
Europe has a long experience of integrating new entrance
candidates into an existing framework of monetary and financial
cooperation which may provide many lessons to other regions.
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