Carlos Mauricio Mirandola
Working Title: "Innovation, Disruption, Virtualization: The New Transformation of Wall Street"
My research seeks to provide an improved understanding of the changes that have been shaking up the world of trade in securities. In a brief period of less than a decade the securities industry has been transformed. The largest exchanges around the world have demutualized; consolidation is on the rise, and mega-mergers and international alliances are taking place in increasing numbers. However, the big exchanges are still looking for their safe spot. Trade increasingly occurs in virtual platforms, innovation in trading systems is booming, and the diversity of business models and alternative trade systems assert new challenges to the leadership of the so-called “national” or “regulated” markets. Alternative trading systems (ATS), electronic communications networks (ECNs), crossing networks and “dark pools” are draining liquidity from traditional exchanges.
The project has two main objectives. First, it aims to explain what has caused this new transformation of Wall Street. Some studies mention technology and competition as its main determinants. Legal factors have a marginal or secondary role. This project will advocate a more strategic role for the law and work with different hypotheses. It will claim that (a) governance is an endogenous choice, and getting it right has been making all the difference for the current winners of the process. Moreover, (b) regulations such as RegNMS and MiFID have been central, not only to increase competition, but also to change the very nature of the trade in securities business. The game is no longer about dealers competing for quotes and information, and exchanges competing for listings; the new rules mean the game is about technological platforms competing for trade flow. As a corollary, technology is not an exogenous factor as claimed by some scholars: technological incorporation in the securities trade business should be treated as an endogenous variable, a function of the regulatory regime.
The second objective of the project is to discuss policy orientations flowing from the findings of the first part of the research. Until now trading rules such as NMS and MiFID have focused on domestic exchanges and dealers in order to create a national (single) market system and avoid fragmentation. If the hypotheses above are confirmed, these findings may do much to demonstrate that the current orientation is out of touch with the reality. This would be the case for two primary reasons. Firstly, in the new virtual Wall Street, it is no longer the asymmetric competition between the domestic exchanges and dealers that threatens to fragment the market. Instead, the modern threat is competition at the global level between trade platforms. In this new world, dealers have a progressively smaller role to play, exchanges are no longer the single most important trade venues to be watched, and technical aspects connectivity and interoperability will make room to concerns with standards neutrality and switching costs. Secondly, and most importantly, since platforms allow traders to operate across and off the borders of countries, fragmentation can now migrate to transnational and global levels. National regulations would run the risk of losing effectiveness and find themselves circumvented. If such events come to pass, the aspiration to create “national” or “single” market systems will have lost some of its meaning.
J.S.D. candidate, Columbia Law School
Ph.D., University of São Paulo, Faculty of Law (honors)
LL.M., Columbia Law School (Harlan Fiske Stone Scholar)
M.A., University of São Paulo, Faculty of Law (honors)
B.A., University of São Paulo, Faculty of Law (honors)
Awards, Fellowships and Scholarships:
Heffernan Fellow, Columbia Law School
Ford Foundation - IDCID Scholarship, University of São Paulo
FAPESP Scholarship, University of São Paulo
Areas of Research:
Securities and financial regulation
Law and economics of capital markets
Corporate finance and market microstructure
Industrial organization of financial markets
International trade in financial services
Financial services negotiations, GATS and WTO
International financial architecture, IMF reform
Last updated October 7, 2013