Innovation has a very positive meaning, while when is comes to financial innovation the connotation nowadays is very negative. For the financial innovations this is not without a reason, since it seems that the financial innovations were not designed to create more value for the customer, but actually create perceived new added value that turned out to be high risk products against which the creators of the financial innovations were betting. Winning by betting against the products you were selling. Now the current hot topic in financial innovations are High-Frequency Trading. The maing question is what function do they serve to the financial markets and the economy in general. Obviously they HFT emerged because of the incentive of each trader to be faster than their competitor. But the main question is if this also has benefits to the market and the economy in general. Stiglitz enters the debate:
"The U.S. banking sector has become less efficient in recent decades
despite the increased use of new technologies like high-frequency
trading and products such as derivatives, according to two papers
presented at a Federal Reserve Bank of Atlanta conference." Read the rest of the article
here
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