Financial Market

The future of financial markets and how the world can adapt

When talking about global financial markets, you may think of global stock markets, worldwide indices, trends in international investing, and more. But it is rare to talk about the common interests of the world’s financial and capital market participants.

You may be used to thinking about the different national capital markets as being partially linked and partially segmented. For those lucky enough to live in a free economy, the freedom to move your money anywhere in the world (and the purchasing power that goes with it) is almost taken for granted. Not all regions of the world enjoy the same degree of freedom or have access to stable financial systems, regulators, and checks and balances. But what if there was a future where a truly global and interconnected market was possible? How would the erosion of regional or national borders in financial transactions impact the world economy? Does the idea have any merit, or are we talking about a utopian concept?

IS AN EGALITARIAN GLOBAL FINANCIAL MARKET EVEN POSSIBLE?

I believe we have always been heading toward a global financial market. The existence of the longstanding exchange rate between global currencies proves that. The way our markets have been conceptualized, we were always set up for global transactions. Current technology, with its rising scale and secure mobile or desktop connections, makes everything much easier to facilitate—however, it has unaddressed gaps. As technology expands, the creation and adoption of standards and regulations stabilize, and perhaps one day, there could be a truly global market.

We have the tools to physically build a global financial market. But instituting a set of global regulations that are equally advantageous to all parties concerned and, more importantly, agreed upon could be a much more challenging task.

THE NEED FOR AGREED-UPON GLOBAL REGULATIONS

Deciding on a set of regulations involves more than getting all concerned parties to agree upon them. Without the same level of freedom or financial systems in place, many countries are perceived to lack financial reporting standards—the sort that is taken for granted in a country with the U.S. Securities and Exchange Commission or the Financial Industry Regulatory Authority. Although the SEC insists upon companies complying with all relevant U.S. regulations as criteria to get listed on the U.S. stock exchange, these regulations have more or less become synonymous with a set of globally agreed regulations. However, many countries have different commissions and different stock exchanges that handle their money in ways that don’t meet the standards of other countries.

I believe defining a global set of standards and getting other countries to open up their economies to global trade can help businesses and entrepreneurs in those countries address many parity and access issues. This could help many businesses and entrepreneurs in countries where companies and people are not allowed to purchase or sell stock outside of their borders. If nothing else, they would have the option to choose whether they want to stay country-focused or take their business global. In fact, I believe we have been moving toward integration for quite some time, although the situation has become more complex since the war between Russia and Ukraine began.

KEEPING POLITICS AT BAY

Whether we like it or not, there is no way for finance or businesses to completely extricate themselves from politics. Fractures in the political landscape, whether in Russia, China, or elsewhere, will ultimately roll into the financial markets. Irrespective of where your company might be listed, you will likely still suffer the financial (and other) tremors that stem purely from political fault lines. Private or publicly listed companies have negligible political maneuverability, remain answerable to shareholders, and cannot afford—and mostly refrain from—getting involved in political change-making (good or bad).

But a globally integrated financial market can have a huge impact on all such businesses. They could attract investments from all parts of the world, leading to a fairer valuation on a global scale. It might even be possible to ease much of the existing supply-chain and logistics bottlenecks, potentially leading to a smoother delivery of products and services all over the globe.

For people living in closed economies, exposure to the global market can provide an unforeseen level of buoyancy and make real upward economic movement possible for people no longer limited or managed simply by local politics. Making a global financial market possible may well involve a concerted effort to transcend politics. Shielding financial activities from politics may not be possible, but one option could be to minimize the impact by reducing political oversight with global standards and regulations. This could also prevent countries from wielding economic sanctions as a tool to resolve political differences.

I believe that at its core, the true promise of any business and the free market lies in the value they can add to life. For many, global commerce could be the key to transformational quality of life improvements for businesses and individuals alike. Currently, with many strained global relations, realizing the dream of an egalitarian global financial market might seem unrealistic. But given its tremendous potential and benefits, maybe one day the world can strive to rise above politics to realize the true value of global commerce.


Founder, CEO, and CIO of HGM Fund, managing investments in the financial technology, health technology, and communications industries.

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