ABSTRACT
The emergence of the financial industry has become a dominant feature in the capitalist economic system since the breakdown of the Breton Woods agreement in the 1970s. Innovative financial commodities, in combination with the new information and communication technologies, have been stirring up the market structure and dramatically reshaping financial landscapes. There are three penetrating and cross-enhancing processes characterizing the current global financial system: deregulation, technological innovation and globalization (Martin, 1999). Deregulation or liberalization of financial markets opens up new geographical markets and encourages the development of new financial products. Under such circumstances, some key financial transactions occurred in a few global cities, while others dispersed to lower tier financial centers connected by electronic networks. Thanks to the development of information and communication technologies (ICT), it was argued that the majority of transactions have become virtualized and even blind to location (O’Brien, 1992). Among the innovations in ICT, a wide array of new financial instruments has appeared on the scene that facilitated greater spreading of risk (Boden, 2000). The most important product innovation since the mid-1980s has been the phenomenal growth of the derivatives markets. 1 The goals of these markets were to enable investors to manage risk by offsetting the effects of volatility, and to allow them to gain profits by arbitraging the gap in information. However, as argued by Tickell (2000), derivatives not only allow institutions to offset risk but have also been implicated in a series of high profile losses which have undermined the financial viability of companies, banks and government entities (see also Pryke and Allen, 2000). So, how to survive and even leverage futures markets has become the key issue for financial institutions seeking to grow in the turbulent world market.
