Proposed Methods Essay
The process of globalization appeared to be permanently growing today; it is significant to be aware of what its major factors are and how they impact the development of the worlds’ economy.
The key filed of financial globalization is the international economic framework (economy), i.e. international marketing; such processes as, for instance, the exchange and consumption provided by the companies in their internal economies and in the global market. As a consequence of the financial globalization, the capital obtained the considerable flexibility, looking for the most appropriate and beneficial possibilities. The process of financial globalization has increased the impact of global markets on the performances of lending and borrowing by the citizens of various states (Aizenman & Pinto eds. 2006). This process has resulted in the growth of the global network of financial establishments and corporations, and to basic alterations in their framework of the enterprise of flows of capital management. Simultaneously, the process of financial globalization influences different states, as the competition of national economic systems for credit stocks of capital, which are freely reallocated on the scale of the international economy, emerges to be tougher in new circumstances.
The notion of financial globalization incites the states to look for the new opportunities to enhance the investment interests of the internal economic system. As a result, this issue is extremely pressing; it is important to conduct a survey of the causes and obvious consequences of the financial globalization, its impact on the internal economic climate. It is worth saying that there is proof that each process which is caused by the financial globalization and the negotiations of highly developed countries in the economic field of the poor states has a successful end. The global crisis increases, and the leading business players cannot do anything about it. What is more, it is also worth drawing attention to the fact that the countries that do not let much interference in their economics (like India, for instance), keep developing in these conditions at the time when such countries as, Germany or France are obliged to live more frugally, since their capital is seriouslty effected by crisis.
Considering the issue of economic growth, it is also necessary to make mention of such notion as competitiveness. Any kind of competitiveness takes its root in economy. It is defined by nation’s productivity, social infrastructure fiscal policy, and the microeconomic environment. As for the highly developed countries, including the U.S. they are characterized as the successful nations which contributed a lot to the world's economy and technology. Obviously, with such a huge expansion and economical leadership, American success has positively affected the quality life of the American nation in terms of income, low unemployment and Internet technologies. The fact that it corresponds to reality is beyond doubts. The same is about the other countries abiding the principles of competitiveness.
In order to effectively conduct a survey and make it relevant and useful, there must be proper methods used. For this topic there is a need to carry out an investigation at all three levels – empirical, empirical and theoretical, and theoretical itself. At the empirical level of investigation the following methods are used:
Observation – to choose a few processes which take place in the world or in the country as a result of financial integration, identify the causes of these processes, notify the peculiarities of their development, predict possible outcomes or analyze them if the chosen process does not take place anymore. Collecting the sufficient data is really necessary at this point, in will be easier to make the practical part of the research if there is a good theoretical basis. This method is important in all types of the research.
Collation – to be aimed at comparing the factors of the selected system in the particular country with the causes in some another one; the same procedure should be conducted with the outcomes and the inferences. At this phase of research it is vital to set up the “cause and effect” unity of the global capital flows and the financial flows in the particular state, the process of integration of a highly developed country to the less developed one, and the consequences of these flows and globalization. This methodology is necessary to be utilized to preserve the conduct of the investigation, since it will be simplify and facilitate the process of making some suggestions as well as inferences. Collation will be utilized later too, basically to compare the theoretical information with practical data which was received after conducting a thorough investigation of the selected financial globalization processes and of those processes which were present on a narrower scope.
Principles of Economic Growth
Undoubtedly, the issue of economic growth is essential in XXI century due to the appearance and fast development of the companies and extreme compatibility of the modern market. Thus, it is a necessity for the corporations and small enterprises to pay more attention to the available marketing techniques and approaches in order to target the customers. As Kotler, Keller and Burton (2009) wrote in their book on Marketing Management, “Marketing is everywhere. Formally or informally, people and organizations engage in a vast number of activities that we could call marketing. Effective marketing has become an increasingly vital ingredient for business success. And marketing profoundly affects our day-to-day lives. It is embedded in everything we do – from the clothes we wear, to the websites we click on, to the ads we see.” Therefore, the marketers should define the products and services that are valuable for the customers and model their behavior with benefits for the company.
The phenomenon of the economic growth deserved massive attention of the global public after the raise of the trading volumes executed by HFT methodology. Undoubtedly, the invention of this one more sophisticated technology made a great contribution into the global financial market that is ruled by modern innovative techniques. Nevertheless, the topic is quite a new one and sometimes lack reliable and trustworthy information concerning its influence on the public market. Thus, there is no common point of view regarding the topic of HFT and there are many discussions in mass media to be observed nowadays.
The historical background of the notion of High Frequency Trading turns us back to the 1999 when the United States Securities and Exchange Commission allowed the first electronic exchanges in the world
High Frequency Trading
At first, the execution time of the operations in the high frequency trading was about a few seconds but with the technological progress is has become at the rate of even micro seconds in the year 2010. Generally speaking, the notion of the HFT was hot discussed not only in the sphere of economics and business; recently, this subject deserved real popularity and acknowledgement of the broader readership (Bordo., Taylor., Williamson 2003). It is interesting to know, that at the beginning of the 2000s the number of the equity orders managed by the high frequency trading technologies was less than 10 %. In spite of this, the quantity has grown with rapid speed and reached the rate of 164 % and the sum of $141 during the years 2005-2009. Moreover, a lot of high proficiency companies are aimed at providing the liquidity to the stock exchange market that has the volatility of the lower rate and making the investments cheaper for the market participants. The statistics dedicated to the HFT may vary in different countries. For example, in the United States of America the number of the HFT firms is about 2% of the 20,000 companies dealing within the trading market. Nevertheless, the account of the equity orders volume operated by high frequency traders is 73% which is considered to be quite a high index. The situation in USA is depicted in the diagram “High-Frequency Trading Volume for U.S. Equities”. According to it, the number of independent proprietary firms was estimated at the rate of 48%, the broker-dealer proprietary desks were of about 46% and the percentage of hedge funds was 6%. This information was taken from the materials and researches of TABB Group. Besides, the tendency of HFT growth during the years 2005-2009 in USA one may follow at the next diagram. It is obvious, that the volume of equities controlled by HFT increased from 21% to 61%.
According to the information from the Bank of England, the percentage of the equity orders volume accounts for approximately 40% in Europe and about 5-10% in Asia with the tendency to grow. As for the value, the consultancy Tabb Group suggests that the high frequency trading covers about 38% of equity trades in European countries and 56% in American continent (Grant J., 2010).
In order to have deep comprehension of the notion one should try to analyze all the explanations of the High Frequency Trading. There are some special programs that are able to adapt the market data and take advantage of the trading possibilities which remain to be open during some short period of time. Therefore, HFT utilizes special computer soft and hardware in order to capture short-term fluctuations in equities, options, rates of currencies and etc.
As it was already stated, this notion is quite a new and contradictory issue in modern scientific world. It raises a lot of hot discussions between all the market participants and scientists regarding the benefits and detriments of HFT and its influence on the traditional institutional investors. Generally, the authors of academic papers feel quite positive about the usage of the HFT in modern market and they present only beneficial moments of this strategy. They argue that this strategy makes great contribution into the market quality and price formation. Moreover, those fund managers and professionals who are dealing with high frequency traders claim that HFT provides the financial market with good liquidity thus allowing the transaction costs to spread to other investors. The supporters of high frequency trading are also convinced that this phenomenon contributes to the price discovery and make the market more united.
On the other side, there are some professionals who claim against the HFT and they are mostly buy-side institutional investors. They argue that high frequency trading influences their peculiar feature to manage orders in a bad way. They also state that high frequency traders make their profits at the expense of the traditional institutions of financial market (Zhang 2006). Therefore, both sides of the conflict agree, that the authoritative supervisory institutions should control these strategies and their implementation in order to prevent the market from the unforeseen effects on the quality and integrity of the market.
Consequently, the study of the high frequency trading is considered to be quite a theoretical one as the empirical investigations are restricted by the absence of accurate and reliable information. Thus, the further researches are needed in order to create the full vision of the phenomenon of HFT, its advantages, disadvantages and its impact on the development of the market.
Undoubtedly, any estimation of the high frequency trading and its strategies should be made with the functional but not the institutional purpose. It is well known, that it is already used by all the groups of market players, thus, focusing only on the one group may lead to the
discrimination of the participants and bad influence on the functioning of the HFT strategies. Therefore, this system requires specially educated people and peculiar instruments to manage the trading algorithms and their functional peculiarities for protecting the market players from the potential risks.
Moreover, it is natural that the usage of HFT demands high level of transparency and also collaboration between the market players in order to provide the feeling of trust and confidence in the market. Generally, the public is quite sensitive to all the innovative implementations in the field of finance after the economical crisis. In such a case, the firms utilizing the HFT strategies should take responsibility for all the risks appearing in the process of its functioning. Naturally, they act in their own interest and this fact may become the topic for further debates. That is why, the HFT entities should pay attention to the fact that their task is to contribute to
the development of the securities market, provide it with the proper level of liquidity and assure that all their actions are beneficial for the markets in general.
According to some of the scholars, the study of high frequency trading strategies is more sufficient than the investigation of the notion of the HFT. Therefore, one may assume that this side of the phenomenon worth deep analysis and justification. Indisputably, there are too many HFT strategies to pay attention to them all. Moreover, some of them are already known and not new for the financial market. As the authors of recent researches claim, the notion of HFT is often related to the traditional trading systems that are developed by IT. In such a way, it is very significant to investigate the individual strategies that use so-
called high frequency technologies. The results of this analysis are presented in the following table that throws the light on the most popular strategies based on the principles of HFT.
High Frequency Trading Strategies
HIGH FREQUENCY TRADING
This table illustrates the division of HFT strategies in details and is proved to be quite a reliable source of information.
In today's economy, financial flows are the primary object of management in any enterprise, because every economic decision, directly or indirectly connected with the movement of funds. The fact that it corresponds to reality is beyond any possible doubts. The thing is that financial aspect possesses the fundamental place in the process of stabilizing; the company is not to succeed in implementing certain projects in case it does give any kind of profit. With the rapid development of globalization processes, the issue of capital accumulation appeared to be the matter of paramount importance. In accordance with many experts on economy, capital accumulation is the regulative principle typical for macro-social regime of accumulation, which basically involves both specific forms of capitalist production as well as social consumption norms. In other words, it is a modern social and economic, which is based upon the mass industrial production (Miles., Scott., Breedon 2012).
Capital Accumulation is the management of financial resources and financial activities of the entity, aimed at implementing its strategic and operating goals. One can state the financial management to be pivotal source of the development within the company. Speaking about capital accumulation, one cannot but mention it to deal with financial analysis, planning, location and distribution of capital.
The statement mentioned above helps understand that the discussion item appears to be rather influential one within different spheres having direct reference to the working process. It covers all major areas of finance and extends to all segments of the financial market. Capital accumulation is also a system of impacts that is performed by the subject of financial management (financial manager) towards the object of the financial management, which are aimed at the improving of the object. In addition, it regulates the principles of forming entrepreneurship (Hanley., Shogren., White 2013). The increase of the stock of capital is undoubtedly the determinant factor while contemplating about successful organization. The process of accumulating the capital is implemented in its inherent features and has a pronounced specificity of cash flow management. That is the reason why its functions are predefined by the tasks of finance in the companies.
There can be distinguished two basic types of functions of financial management. First of them is the functions of the object of the management that include reproduction function, which ensures the reproduction of the invested capital on an extended basis; production function, which ensures the continued operation of the enterprise and the circulation of capital; and control function, which deals with the control of money and management of the company.
The second type of functions is the functions of the subject of management that includes forecasting of financial situations and conditions; planning of financial activities; regulation; coordination of all financial departments in the main, auxiliary and service units of the enterprise; analysis and assessment of the enterprise; incentives; and controlling money circulation, the formation and use of financial resources (Nafziger 2012). It is necessary to emphasize the fact that the second type of functions of financial management is mainly about elaborating schemes of all possible prospective applications of finances in future. This is the mechanism responsible for conducting the search of optimal financial operations that can bring in profit (Torreli 2013).
Endogenous Growth and Convergence
Generally, the notion of endogenous growth and convergence is considered to be among the fundamental issues of marketing as it deals solely with the customer’s perception of the product. It is interpreted as consolidated measure because it encompasses subjective perceptions of the consumers and all the limitations that are related to such objective elements as price, quality, etc (Sweeney & Soutar 2001, p. 204). Not surprisingly, that the majority of authors agree that endogenous growth refers to a tradeoff between all salient costs and benefits (Sweeney & Soutar 2001, p. 206).
One of the most significant advantages of endogenous growth is the technological advances and the rapid development of media, for instance communications. This process is considered to be rather innovative, being aimed at increasing material wealth, services and goods by means of the international divisions of labor through constant international relations and competition on the market. As the result of national economy integration into the international economy, such business operations like trade, foreign investment, migration, capital flow and computer applications implementation began to prosper immediately. Overall globalization resulted in the expansion of businesses and, consequently, led to the emergence of the concept of supply chains. The reason is quite straightforward: there are very few companies, capable of producing the end-product for an end-customer from raw materials without any assistance from other organizations, using solely their own resources. Thus, in order to satisfy the demands of the global market, a network of actors is involved in activities (such as purchasing, transforming and distribution) to produce products and/or services (Miles & Scott 2005). The issue of convergence is also the matter of great importance in terms of economic growth, since its construct is based on the necessity to explore new approaches to running business utilizing brain potential. Regarding the issue of convergent thinking, one should be aware that it is the mode of thinking when the correct answer or solution can be offered without any creative solutions. When making a suitcase, we need to rest upon our brain and awareness or just be knowledgeable at how to make a suitcase without discovering something new.
Human Capital and Technology
Learning organization is considered to be the term, characterizing the organization, which is targeted to facilitate the learning process of its employees by means of transforming itself. It tends to be clear that every particular organization is in dire need of appropriate learning style, which can provide the effective internal management between all organizational divisions. One of such effective style is charismatic leadership, which is usually typical of people who are born to be the string knowledge workers capable enough to efficiently deal with all complicated management tasks. Basically, the charismatic employees need to possess charm and grace. Secondly, they have self-belief, which makes them the professional and confident decision-makers. Third, all charismatic workers are very conscious and responsible people and they always pay the particular attention to every manager. If every manager feels this, the learning organization will strive to pursue important organizational goals with the help of strong desire for self-perfection of every employee (Hawkins 2005, p. 77). Charismatic employees are always respected, because most of them usually take personal risks in the name of their beliefs. Due to the fact that they are very persuasive and intelligent, they are usually noticed to effectively use body language and verbal language. This turns them into powerful vehicles, improving the company’s role on the market. The learning organization can also prosper if the charismatic worker is skillful at the use of storytelling and metaphor. As a rule, this creates the positive environment, which usually helps the managers perform their functions at maximum, never being forced to work by the employer. Being aimed at building business groups, the charismatic managers will always focus precisely on making such groups distinct and clear. If such attitude is applied, then the group is supposed to have its own image, which does not resemble the images of the other groups of learning organization. One more positive point about charismatic human capital style in learning organization is that strong workers usually take into account the minds of other managers and make common decisions. This so-called “sensitivity” is seen to positively contribute to both organizational environment and employees’ needs.
When choosing between transformational and transactional human capital styles for learning organization, it would be necessary to say that transformational human capital is the best option. First of all, transformational worker is always charismatic and directed to making changes and improvement. Secondly, they can inspire the others to think about current problems differently or in a new way (Sloman & Garratt 2013). In every learning organization employees are engaged in determining and solving various problems. That is why they also enable the company to continuously change and improve. Respectively, change is observed as ability to find reasonable and sensible solutions in problematic situations.
Change in learning organization is also necessary in terms of adaptation of new ideas, analyzing the customer market and developing new marketing strategies. Due to the increased pace of change, which can be understood in the light of globalization, technological implementation and e-commerce, many learning organizations are searching for the possible ways to extend their business. In such a case, the transformational or charismatic human capital style is the only one to be effective.
One more reason for the necessity of applying the transformational style is because management is more effectively done if the employer and charismatic leader controls all the processes with his employees, rather than takes control over the work of his managers (Johnson 1998). This way the leader can facilitate the teamwork, initiate the processes linked to change and expand the capacity of the employees in terms of shaping the future management. All above mentioned can be effective in learning organization and it gives us the adequate evidence to criticize transformational leadership for being ineffective and corrupt. Transactional leadership with its bureaucracy is destined to failure, placing the personal authority and power of employer on the forefront, although neglecting the minds and violating the rights of managers.
Consequently, the analysis of the economic growth journals and other available sources of information help the reader to have a brief look on the latest tendencies of the financial market in general (Reinert 2012). Thus, according to the authors of various researches, contemporary growth occurs as the result of technical means to implement newly established trading strategies. This phenomenon applies the technological development in the financial sector to maximize the benefits from already functioning trading strategies. Thus, the scholars suggest focusing on the economic growth strategies and their effect on the market and its players. Moreover, economic growth is considered to be the result of natural revolution rather than a completely new discovery. The reasons for its fast development were competition, innovation and regulation. According to many market specialists, economic growth makes contribution into the market liquidity, price discovery and market efficiency.
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