The more information you have, the more you are able to manage your risk, the more you can make a good decision of whether to buy, sell, or hold. The network model implies that markets function very well with high transparency, low transaction cost, which leads to high liquidity and low volatility. Transparency, robustness in infrastructure, clear and fair regulations, low transaction costs are the major reasons why the leading financial centres such as London, New York and Hong Kong maintain their leadership. But with technology, only the paranoic survive. Competition and consolidation of exchanges Technology drives competition through diversity, quality of service, timeliness and easy access.
Technology drives down costs, but at the same time, investing in technology is expensive.
Consequently, what Hong Kong has witnessed since the Asian crisis is not only increasing price competition, but also direct product competition. As listings become global, as in the case of HSBC when it lists in New York in addition to London and Hong Kong, trading will be on a 24 hour basis. The extension of NYSE trading hours to 19 hours would mean that Hong Kong shares can also be traded in New York time, at NYSE trading costs. Hence, exchanges are battling over price, efficiency and liquidity in an effort to become the key price discovery hub in their own time zones of the global trading network. This has now prompted Paris, Madrid and Milan to discuss the creation of a Pan-European stock exchange.