Internet in Financial Markets

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THE EFFECTS OF INTERNET-BASED COMMUNICATION ON THE FINANCIAL

MARKETS
[Name of Student]
Class
Professors Name
Institution
Date
Abstract
Financial markets contribute significantly to the economy of a country. It also offers a source of
income to the majority of people who participate in requisite transactions that march this
industry. Different classes of stakeholders participate in the segment that may come from diverse
cultures and geographical locations. Communication plays a crucial role in enhancing an
effective interaction among the different players in the financial market. The effectiveness,
efficiency as well as convenience of the form of communication in the financial markets are
critical factors to consider if the transactions have to be successful. In the recent past, the internet
has permeated most of the business field and financial markets are no exception. This paper
posits to look in to the contribution of the internet in the successful communication and
interaction among different players in the financial markets
Aims
To achieve the objectives of this research, the researcher had to gather information from a variety
of sources. Documentation data from reviewing various sources written by other scholars in the
same field has been very influential in shedding light on the subject under investigation. The
researcher also considered case studies and surveys to complement any information derived from
secondary sources of information.
Methodology
The research took into account the philosophical limits of the study from an ontological
perspective. In this regard, the researcher justified the use of objectivist- oriented philosophy due
to the fact that the phenomena under investigation were naturally objective. The researcher
employed secondary research through investigating impact of internet-based communication
technologies on the development of the different financial markets.
Results and findings

The exercise called for analysis of margin of error, dependability of source as well as adequacy
of information. The secondary data focused on the stock brokers within the financial markets.
Limitations of the research
The researcher had an obligation of addressing the challenges and limitations in the study which
posed a significant danger to the quality of the findings. It was the aspirations of the researcher to
address all pertinent issues in this investigation but success in this endeavor was restricted as a
result of the limitations.
TABLE OF CONTENTS
Abstract....................................................................................................................... 2
TABLE OF CONTENTS.................................................................................................. 4
Chapter 1: BACKGROUND............................................................................................. 6
1.1 Introduction.......................................................................................................... 6
1.2 Problem statement.......................................................................................... 11
1.3 Research objectives and questions.................................................................13
1.4 Structure of the research........................................................................................ 13
Chapter 2: LITERATURE REVIEW............................................................................... 14
2.1 Theoretical perspective for internet-based marketing communication...........15
2.1.1 The internet and marketing theory.........................................................................15
2.1.2 The model of relationship marketing......................................................................17
2.2 The direct resultant impact of the Internet technologies.................................19
2.3 Enhancing the existing process through Internet............................................19
2.4 Winner-takes-the-most strategies proliferation...............................................20
2.5 The effect of the internet as the creator of the new interactions and processes
.............................................................................................................................. 22
.............................................................................................................................. 23
2.7 Intensification of competition..........................................................................24
Chapter 3: METHODOLOGY........................................................................................... 30
3.1 Research hypothesis....................................................................................... 30
3.3 Research Strategy........................................................................................... 31
3.4 Research ethics considerations.......................................................................31
CHAPTER 4 RESULTS AND FINDINGS.........................................................................32
4.1 Introduction..................................................................................................... 32
4.2 Analysis of Hypothesis 1.................................................................................33
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CHAPTER 5 CONCLUSIONS.......................................................................................... 50
5.1 Conclusion....................................................................................................... 50
5.2 Limitations of this research.............................................................................53
CHAPTER 6 RECOMMENDATIONS................................................................................ 54
Bibliography................................................................................................................ 55
Chapter 1: BACKGROUND
1.1 Introduction
The Internet has profoundly affected the financial administration segment, drastically changing
the costs and capacities of promoting, distributing and overhauling financial products and
empowering new sorts of items and services to be produced (Clemons & Hitt, 2000: 2). The
institutionalization provided by the web, furthermore, the minimal effort of Internet
correspondences and exchanges have made it conceivable to achieve clients electronically in
ways that were restrictively unreasonable even five years prior; without a doubt, preInternet
endeavors at the online conveyance of retail money related administrations were inside and out
disappointments in the mid-1980s (Clemons & Hitt, 2000: 2). The simultaneous development
and actual institutionalization of Internet-empowered individual monetary management
programming (for example, Quicken and Microsoft Money) have likewise added to an
expanding exhibit of ease and possibly wealthier approaches to give data and exchange
administrations to clients.
The boisterous traders in the past New York Stock Exchange relied on yelling orders loudly to
one another that resulted in raucous din. The traders were gathering within trading areas of the
stocks once a story revealed the emergency of a stock. This is a traditional way of conducting
business in the stock markets that currently was replaced by high-tech trading. Nowadays,
investors can comfortably research the emerging stocks through the internet and then purchase.
Emerging technology has significanmtly influenecd performance in finacial markets. First
technogy involved - the telegraph which came with its installations of the networks in the realms
of its applicability (Cantoni & Tardini, 2006: 35). Likewise, new emerging technologies must
also be equiped with their installations at the finacial realms at national as well as international
levels. Emerging technology in the finacial market has led to colossal implications on the
relevant structures in financial markets
The internet can be associated with both revolutionary and disruptive technologies with profound
implication on the style and speed of transacting business in the financial markets. For instance,
the one of the implications of the internet is improvement of communication. Technology has
had benficial impacts on investments in the finacial markets with the retail investors being the
biggest beneficiaries. Investors have been supplied with unprecedented information access to the
stocks and products available in the financial markets. Through the internet, an investor can
easily access the information concerning the earning reports of the organization, stock prices as
well as the breaking news concerning the stoks issued by a particular company (Byrnes &
Bloink 2015: 64). The internet has also benefited the financial advisors as they rely on the
current developments to inform their clients. The companies are also able to track down the
progress in their stock and the instantaneous information translates to informed traders, investors
as welll as advisors.
Therefore, financial markets are able to use of computer system to buy and also sell their orders
in real time. This also offers an opportunity to the investors to know the details of the stock in
relatively short time period. The use of electronic trading eliminates the traditional way of
handling transactions by individual people thus reducing the frequency of errors. However, the
traditional verification time of three days for money exchange between the seller and buyer as
well as confirmation, that the shares have entered the buyers account remain in force, the actual
accomplishment of electronic trade is executed within seconds.
The internet-based communication is unsettling long-established models of business in regard to

services undertaken by intermediaries while executing transactions. Apart from the brokerage
firms as well as banks who have been traditional intermediaries, real estate agents, travel agents
and retailers have had their share of impact (Lao and Bu, 2016: 8). For instance, via the use of
past data, there was a decline in the number of airplane tickets sold via independent travel agents
accounting to 52 percent in 1998 as compared to 80 percent in 1996. In the year 1999, the
number of transactions conducted over the internet in trading stock by individuals accounted to
30 percent of all the stock traded. This can be compared to zero percent in the year 1995. The
effect of disintermediation has affected the banks where securitization of money-market funds in
respect to individuals saw the entities losing a sizable number of the customer base. This means
that through rapid access of networked information systems by individuals, many of the service
rendered by banks turns out to be disinter-mediated (Costa, Goulart, Cupertino, Macedo and Da
Silva, 2013: 1671).
As discussed, information technology allows intermediation. On the other hand, it also mandates
reinter-mediation. This means that via the use of information technology, individuals requires
integration of service in order to obtain sense of the variety of products and services offered over
the web. The use of web-based communication has intensified in the developed nations. For
instance, adoption of internet-based services has increased in the United States by over 80
percent. Internet electronic business has far been practiced within the US and there is likelihood
that the trend will continue (Vogel, 2014: 65).
While the global financial market is been operated over a legacy system of regulated financial
firms, it pose a threat towards the stability of the national financial markets. The threats amplify
even further when the influence of institutional intermediaries is removed and intricate people
are mandated to contribute in the markets through intermediaries offering scanty guidance. For
instance, in the recent past, the US Security exchange has worked hard in control of a wave of
fraud committed over internet through sweeps of the internet sites as well as increased cases of
enforcement actions (Pozniak, 2013: 110).
Technology has transformed the way of trading in the secondary financial markets. The brokerdealers as well as institutional investors have turned to the use of powerful computer systems
with complex applications. The essence of this is to manage inventory, order flow and more so to
receive the market data, company information as well as research reports. The internet enhances
communication networks that have been established. The revolutionized ways of conducting
financial business prompts commission brokers to do business at different locations (Vogel,
2014: 67). The main crucial factor that the stock broker considers is the availability of the vital
facilities that would prompt his accomplishment of the impending transactions. In this respect,
different stakeholders access financial-market information from computer laboratory, cyber cafes
as well as at their home localities. This issue prompted a thorough research concerning the data
obtained in the secondary market. Adoption of electronic trading is a boost to high-frequency
trading as an important phenomenon in the finacial market. The traders in this field can
accomplish the tasks of purchasing and selling the stocks in merely a single day, and in most
cases, they can also execute complete buy-and-sell cycles in just a few minutes. This trend has
initiated the common day trading among people but the real impact is associated with the
efforts of institution investors in their initiation of numerous shares within a relatively short time.
The trend has also triggered a frenzy in selling and buying among investors, who are motivated
to take part in a seemingly developing trend in specific stock (Byrnes & Bloink 2015: 64). This
has been a significant milestone in trading within the finacial market.
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The majority of institutional investors including the hedge fund, the mutual funds as well as the
pension funds make use of some programs in purchasing and selling their stocks. This has
opened an opportunity for the traders to purchase and sell-off their stocks since the programs
uses set dates as well as time for the trade to be executed. However, at times the investors are
fooled by sudden volumes of the stocks (Cantoni & Tardini, 2006: 36). Additionally, there may
arise technology hitches in some institutions that triggers sudden selling and purchasing
processes. These are the events that raise panic among some traders as there are no news of trade
justyification and their transactions are merely make them relevant in the trade.
Developments in the financial institutions are made as a result of the emerging technologies
through instant communication. These technological advancements are anticipated to take a
similar trend as the old day telegraph. The internet has greatly influenced the operations in
contemporary global financial markets and there is hope that in the future a complete
transformation in the performance of financial institutions shall be achieved. The purpose of the
current study is investigation on the contribution of the internet in transforming contemporary
financial markets through application of mixed solutions. The result of this dissertation could
help those company improve their communication on the market and also Internet could be one
of the most important tools used by marketers to change their strategies.
1.2 Problem statement
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The contemporary financial market that encompasses financial institutions and stock markets
adopts high degree of diversity in their operations. Communication plays a pivotal role in
enhancing execution of financial operations in the financial market. Sellers, buyers and the
intermediaries have to engage with each other through communication in any transaction.
Diverse range of securities, tangible assets and commodities are typically traded in the financial
markets by different players (Byun & Roland-Luttecke. 2014: 847). The nature of the market is
also extremely diverse. It varies from stock markets, insurance markets, foreign exchange, and
derivatives to bond markets. The expansive nature of the financial markets therefore demands
that a large number of different stakeholders are involved in this trade. Lenders working on
individual capacity, government agencies as well as organization form the bulk of the
stakeholders in the financial markets. There are also the borrowers who form a significant
proportion of the stakeholders and can also be in a similar categories as the lenders as mentioned
above.
Another important segment of the stakeholders in the financial markets is the investors. Their
role in the trade in financial market is to facilitate convenience in trading through giving funds to
interested individuals or parties. Such funding is used in the acquisition of equity and debt
securities that are anticipated to give back in terms of financial gains. The speculators also form a
significant segment in the financial markets. Their participation involves deriving financial
benefits from the stock markets without an explicit exposure to the possible long-term risks.
Consequently, they are involved in purchasing, holding and setting the prices for stock bonds,
collectible derivatives and currencies. The central banks may also engage in the activities of the
financial markets not though the direct participation but rather by intervention.
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Participation of the mentioned parties requires high degree of efficiency in communication while
transacting their business in the financial markets. The previous methods of communication
applied during financial markets transactions were based on constitutional documents provided
by the financial institutions, the state as well as financial legislation. This was so because of the
need for government scrutiny of the activities undertaken in securities trading and in the financial
markets.
In this traditional approach of business transactions in the financial markets, orders were sent and
received through oral communication by telephone or through mail. However, this antiquated
procedure was replaced when the interned was introduced in to the business world. The internet
henceforth offered means of instant communication with all transactions being simplified
significantly. The internet has been virtually acknowledged by all financial institutions as the
primary and mandatory approach of communication between the stakeholders and participants in
the financial market industry (Cantoni & Tardini, 2006: 36). As a result, there is a need in
gaining more information and access to the possible merits associated with the use of internet in
conducting business in the financial markets. In addition, usage of the internet has some hidden
risks as well as resultant implications and at the same time, sufficient research in this area has not
been undertaken. There are latent dangers in the industry that may be manifested in a variety of
forms. These include the possible leaking of classified information to malevolent parties and
dismissal of staff members, who are engaged in the delivery of classified information.
1.3 Research objectives and questions
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To determine the influence of internet-based communication on the international

financial markets.
To assess the predictability of financial markets based on internet based
communication.
To determine the actions taken by market players to become prepared for the new
changes.
The research questions were identified as follows
What is the influence of internet-based communication on the international financial
markets?
Is this influence predictable?
What actions should the market players take to become prepared for the new
changes?
1.4 Structure of the research
The research is divided into seven chapters, which include the abstract, introduction, literature
review, methodology, results and findings, conclusion and bibliography. The abstract provides an
overview of the research as well as the methods used for data collection and analysis. The
chapter on introduction highlights the problem the research analyzes. It also outlines the
objectives the researcher uses as guidelines when addressing the research. The introduction part
also incorporates research questions the researcher will use when reviewing the findings and also
the research problem. The chapter on literature review analyzes previously done research from
various authors. This analysis is essential in understanding the topic under review. The
methodology chapter identifies the methods and design used to carry out the research. In this
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case, the research methodology incorporates secondary research. The results and findings chapter
analyzes the data. This chapter depends on the results and the aims of the experiment the
researcher used. The use of charts and graphs is used by the researcher to interpret the data
obtained from secondary sources. The research incorporates the conclusion and recommendation
section. The conclusion builds upon what the researcher discussed and it tries to refer the
findings to other research conducted globally. The conclusion part ties the findings of the
research with previously done research. The recommendations part postulates further areas of
research as well as highlighting how the flaws associated with the research affected the results.
This part also suggests improvements, which could be included into the research design.
Chapter 2: LITERATURE REVIEW

This chapter reviews the literature of the study. Literature will be reviewed in line with the stated
study objectives. The review will relay greatly on data obtained from published reference
materials such as books, online magazines, and journals. The effect of the Internet on monetary
markets is multifaceted and very significant. The review will provide an overview of major past
activities that had earlier been studied in relation to how internet-based communications affects
the financial markets.
2.1 Theoretical perspective for internet-based marketing communication
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In the previous 20 years, the significance of utilizing the Internet as an aggressive marketing tool
has been perceived by numerous experts and researchers. Whether one is discussing little or
expansive associations, who compete on a local, territorial or universal premise, the Internet is
the scaffold between the organization and its partners. Dutta, (1999) research analyzed the ways
business associations were misusing the Internet. Their outcomes had shown that most large
companies and multinationals are making little utilization of the Internet, regarding it simply as a
medium for publishing information. Conventional partnerships were opposed to taking risks and
were accordingly helpless against adaptable and quick moving new participants moving onto the
Internet. Not very many firms were effectively utilizing the Internet for propelling new plans of
action. It is presently regularly acknowledged that the nearness in the online environment is a
need Kotler and Keller, 2008. In any case, Kleinrock, 2010 did not predict the powerful
interpersonal interaction side of the Internet and its quickly developing effect on the general
public. Online long range interpersonal communication sites, for example, Facebook have made
another era of business visionaries, permitting their organizations to be set up and be advanced
with ease. From one perspective person to person communication sites help business visionaries
to interface with each other, and then again they help in associating with prospects and clients, an
exceptionally remarkable stage to increase upper hand Henari and Indrupati, 2012.
2.1.1 The internet and marketing theory
In the contemporary management practices, marketing can be assigned into two distinctive
meanings. It can imply to the wide array of specialized marketing functions that are transacted in
any firm. In these regard, the functions relate to product and brand management, marketing
research, customer service as well as public relations among others (La Porta, Lopez-de-Silanes,
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Shleifer & Vishny, 2000: 5). Marketing can also imply to the concept or an approach serving the
purpose of a guiding philosophy to the entire activities as well as functions in the company that
encompasses a wide array of the business concepts. The strategy of the business is generally
guided by the focus of the market and the competitor in the organization. As a result, it requires
all players in the organization to be customer focused as they execute their functions (Byrnes &
Bloink 2015: 53). The contemporary marketing concept serves as a unifying factor in as far as
the two meanings of marketing are concerned and stresses on the need of marketing to account
for the wide array of processes and functions in the organization. In turn, it posits to address the
requirements of the target markets as well as delivery of products and services to the clients
together with any other stakeholders including the financial institutions as well as the employees.
There is an increasing demand for marketing being a crucial function as well as a guiding
philosophy in the management of organizations.
The internet plays a crucial role in contemporary marketing in organizations due to its
capabilities for supporting a wide array of the processes as well as the functions in the
organization which contributes to efficiency if the delivery of goods and services to the
stakeholders including the customers (La Porta, Lopez-de-Silanes, Shleifer & Vishny, 2000: 6).
The internet serves as a potent medium in communication and can be regarded ascorporate glue,
which is responsible for the integration of diverse sections in the company. The internet also
serves as a facilitator for information management that has currently been acknowledged as a
crucial tool to the strategy formulation as well as implementation of marketing support (Byrnes
& Bloink 2015: 64). A notable shift in the marketing theory has been evident over the last decade
that dealt with a transformation of the emphasis on customer persuasion and production to
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creation of relationships together with communication with the customers. This has the
implication of a shift towards communication, interactivity as well as relationships.
2.1.2 The model of relationship marketing

There is a growing realization by both the practitioners and the academicians on the importance
of creating relationships among stakeholder groups and the customers in organizations. It is
postulated that, more than nine times of cost can be used in acquisition of a new customer
relative to retention of the already existing one. Therefore, the value for relationships must be
upheld in organizations. Good relationships with customers also increase the profits in the
organization because as they stay more in the company, their willingness to pay the premium
prices increases. They can also spend more, demand less and make more referrals.
Therefore, the efforts of the organization in customer retention through relationships building
enhance the cost-effectiveness of the marketing efforts. Relationship marketing is thus an
innovative concept that is regarded as a new marketing paradigm. However, it still remains as a
concept due to the absence of suitable paradigm features. The internet is equipped with
interactive and multimedia interface that offers suitable environment, which can support such a
relationship (La Porta, Lopez-de-Silanes, Shleifer & Vishny, 2000: 6). On the other hand, the
databases facilitate in the storage of information and information supply to prop it up through
enhanced and personalized service delivery.
Therefore, the theory on relationship marketing is a source of conceptual underpinning in one-toone marketing because of its emphasis on customer service. At the same time, the customer is
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well known and addresses the market segment at a personal level. The application of direct
marketing techniques enhance marketing communication and in some cases, the product, to the
customer. The database marketing serves as a technological enabler that facilitates accessibility
as well as storage of huge volumes of the customer-related data, leading to the creation of tactical
and strategic marketing opportunities.
The application of the internet in one-to-one marketing motivates organizations to use these
theories in embracing the merits that come out of relationship marketing. The advantages include
effectiveness of the target, an increase in the breadth, the depth as well as the nature of the
relationship and decreased cost (Costa, Goulart, Cupertino, Macedo and Da Silva, 2013: 1670).
With the rise in application of the marketing theory, there has been a tremendous shift from the 4
Ps model of the transaction-based approach to marketing to the relationship-based approach. An
emphasis of formation of relationships has been preferred as an integral part of the marketing
model. Relationship has in most occasions been regarded as persuasion but owing to the fact
that Promotion serves as a common denominator in the 4 Ps, communication has been
considered as the base of all the elements in the marketing mix.
The internet is therefore the innovative marketing medium that all players in the financial market
must strive to adopt in their transactions. The internet and allied digital technology are harnessed
for the purpose of achieving the marketing goals and objectives. The internet based marketing
serves as both a selling and communication tool and for that reason must be integrated as the
suitable tool for strategic marketing management in the financial markets (Costa, Goulart,
Cupertino, Macedo and Da Silva, 2013: 1670). This requires a shift in focus to the broader
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application in the context of total marketing processes instead of a merely selling and
communication tool.
Effectiveness in communication has been made possible by emerging technology involving the
internet, which is a digital interactive framework that serves a wide variety of purposes (Cantoni
& Tardini, 2006: 38). This implies that the contemporary financial transaction such equities,
derivatives cash or bonds involves recording of alteration of the digital information (Cantoni &
Tardini, 2006: 38).
2.2 The direct resultant impact of the Internet technologies

The Internet being a versatile, digital interactive system of telecommunications network enables
the flow of information from one point of the globe to the other. Financial intermediation as well
as financial transactions are swiftly relayed and exchanged using this technology. An assortment
of financial transactions like cash, bonds, and equities are disseminated via internet technology.
This is the development that has saved time and has profound efficiency.
According to the general perception of professional analysts in the field of financial markets,
emerging technology involving the internet has a remarkable implication in the way business is
transacted in the industry. They have particularly been impressed by research solutions as well as
the internet based communications which has contributed to significant merits in financial
reporting, actions evaluation and efficient business process that have benefited the customers as
well as the service providers alike (La Porta, Lopez-de-Silanes, Shleifer & Vishny, 2000: 6).
2.3 Enhancing the existing process through Internet
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The effects of the internet on financial markets are inclined towards enhancing the existing
processes whereby improving the existing processes is deemed as significant in determining the
structures of future market. The extent of this improvement is so significant, that it entails
profound consequences for future market structures. This being said, improvement has been
found to eliminate the role played by brokers who have in the past teen bestowed the role of
midwife- role in many financial processes (Cantoni & Tardini, 2006: 42). The development of
Internet technologies has made it possible for financial processes in the financial market to sail
directly, without necessity in the intervention of intermediaries. In the past, telephone was the
closest medium to lessen intermediaries, upon initiation of the Internet development; the
processes have been effective because it enabled electronic methods of relaying information.
Moreover, Internet provides provision for handling huge amounts of information at the same
time in addition to providing compounded tools for financial analysis (Cantoni & Tardini, 2006:
45).
2.4 Winner-takes-the-most strategies proliferation
It is obvious fact that, internet framework lacks in share distribution among players, where the
environment is made up of big and small fish. Thus, some tend to gain at the expense of others
(Tobias, Moat and Stanley, 2013: 1684). Consequently, it is a matter of survival for the fittest
where large establishments end up taking the lions share in utilization and benefits of internet
solutions. Situation that demeans the survival of small-scale entities of post-Internet era (Wright,
2008: 54). It has been concluded that strong network effects among the financial markets are
positioned strategically in the way, where winner takes the most (Taleb, 2005: 122). Because of
market dominance witnessed in big business establishments it makes it hard for small-scale
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business entities to companies have lower chances of surviving the post-Internet economies
(Wright, 2008: 56-58). Furthermore, small, unknown disadvantages of the large corporations
become magnified because Internet-based solutions remove the frictions of the early egalitarian
market components (Taleb, 2005: 124).
Existing processes within the financial structure have experienced a sizeable change. The
magnitude of changes has been so significant to warrant profound effects for the overall market
structure. For instance, in some cases the brokers have been eliminated while sending orders
within the financial market. Prior to the emergence of the internet, the whole process used to be
conducted through the telephone. Internet communication in this respect is conducted via direct
connection of an electronic system (Vogel, 2014: 87). Moreover, communication about the
products current prices as well as past and present performance of the market is done efficiently.
Conveying information via the internet has led to democratization of the trading process. The
tools that were presented only in the trading rooms are widely available. These tools are so
valuable to the wise traders. According to Costa, Goulart, Cupertino, Macedo and Da Silva
(2013: 1672), the availability of rapid technology has made the financial market very volatile. In
fact, to an informed but unknowledgeable trader it is easier to lose money over the internet.
There has been an accelerated growth in global information economy in the recent years. This
has been caused by progress in information technology which has hampered the ability of the
financial markets to cope. The networked information systems across the globe have created
threats towards safety as well as soundness within the financial sector (Costa, Goulart,
Cupertino, Macedo and Da Silva, 2013: 1672). This is because data, information and transactions
can be completed fast across borders and thus destabilizing markets in different countries,
causing intense fluctuations of the activity levels within the affected regions. Moreover, the
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advanced networking of information systems has resulted to security threats of the financial
market infrastructure in an instance where such networks are allowed to reduce as the scope
grows.
It is therefore vital to emphasize on network effects or externalities as an indisputable concept in

determining the performance of a given product. For instance network externalities may
influence the value corresponding elements of a given product through enhancement of greater
positive feedbacks. Also, it is worth noting that many software packages are tailored to function
with the Windows operating system (Costa, Goulart, Cupertino, Macedo and Da Silva, 2013:
1672). This situation props up the significance of Windows owing to the fact that Windows is the
operating system that enables other software to operate. This concludes the fact that markets with
network effects are inherently positioned to patronize a winner-takes-most scenario.
Network effects or network externalities are exhibited when the value of a component unit is
high and the unit is solely dependent on the network to function. As a result very many units are
sold but as earlier stated they are dependent on the established network. In the case of the
internet, network externalities exist since subscribers enjoy an unlimited access to interact in a
single network.
Internet based communication technologies initiated the development of wares, and interaction
systems which are traded over the internet. For instance there are accessible digital goods that
can be bought and sold over the internet which include music, movies, software, printed
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information, music, movies and or any other product that can take the form of a digital product
(Kremer, 1993: 683). These forms of trading are less expensive and yet efficient when compared
to conventional models of delivery. The aspect of value enhancement is pronouncedly visible in
Internet based technologies owing to the fact that it is accessible through search engines (La
Porta, etc., 2000: 67).
Empirics have attempted to orient theories that would definitively expound on the existence of a
given technology (Vogel, 2014: 58). La Porta, et al (2000: 66) also contends with the fact that
Technology does not determine society; neither does society draft the path of technological
change. It is therefore concluded that other factors, like creativity and entrepreneurship maps the
route of scientific intervention in technical innovation. Eventually the final outcome is a product
of an intricate model of interaction. Thus the theory of technological determinism is fraud owing
to the fact that technology is integrated to society and the society is best understood when it
exhibits its technological tools.
The internet provides an open relationship with many market sections such as radio, mobile,
software design, television, and movies, where marketing takes advantages of two-way
conversation with consumers which is done via the Internet (Vogel, 2014: 56). It is also worth to
mention that the Internet has enabled the creation of many new career paths. Moreover, the
internet has enabled online employment and ventures like webcasting, blogging, Web design,
gaming design, and animation. The ideology of internet careers has been assumed to exist in
stress-free environment. On the contrary this is a myth since internet careers calls for networking
in order to blossoming in a given field. Internet careers are faced by job instability and moreover
inequality due to the informality and flexibility associated to an individuals career path. All
industries have an opportunity of utilizing the benefits that accompany internet technology and
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as a result many companies have transformed in the manner they carried business in the preinternet era.
2.6 Intensification of competition
Due to the intermediation function that is executed by banks and its contribution to the economy,
financial sector is considered as special case. These institutions serve the role of correction of
asymmetry information of data between the borrowers and the investors as well as channeling
the savings to investment (Bradshaw, 2011: 123). These are important functions that enhance
economic growth and therefore, the linkages involving inter-bank markets together with the
systems of payment which are facilitated by the bank have a special role to play in the financial
markets.
In the financial markets, aspects of stability are conjoined to competition since the highly
competitive structures in this market plat a crucial role in the promotion of stability through
reduction in the quantity of the banks of big sizes such that they can hardly fall. One of the
policy objectives in the financial market industry involves promotion of stability and competition
at the same time (Byun & Roland-Luttecke. 2014: 848). Competition in the market is a motivator
of innovation and efficiency in financial markets that requires stability in the systemic trust that
is the cornerstone of the sector.
Competition can be constructive in the financial markets industry in that, higher degrees of
efficiency are achieved (Bdard, 2011: 1226). This situation is beneficial to the ultimate
customers through packages and stimulus. Just as the case in other industries that contribute to
25
the economy, full and effective competition is beneficial through enhancement of efficiency,
availability of higher standards of services and products to the ultimate consumer, higher
echelons of innovation, reduction of prices as well as enhancement in the global competition
(Bdard, 2011: 1227).
Intensive competition is also resourceful to financial institution as they gain entry in to the new
markets, expand and displace the inefficient service providers in that industry. An increase in
competition in the financial market also motivates the customers to switch service providers
based on their judgment of efficiency in service delivery (Bradshaw, 2011: 530). This movement
by the customers gives a healthy challenge to the service providers to improve the terms of
service to the customers leading to the adoption of highly efficient and reliable processes, thus
reducing the cost of transactions in order to gain a competitive edge in the market. The benefits
that comes with intensive competition must flow in the entire market and this is made possible
by the existence of a regulatory as well as a competitive framework in the financial markets
industry that all players are supposed to acknowledge and adopt (Byun & Roland-Luttecke.
2014: 849). The government plays a pivotal role in making sure that the framework is functional
and ensuring that there are short-term measures that facilitate in rescuing as well as restructuring
any financial system so that no restriction is made to long term efforts of a business to achieve a
competitive edge. This can include mergers, nationalization, recapitalization as well as state aids.
This helps in the protection of the goals of any business in regard of stability as well as
efficiency.
26
The intervention of the government on issues of competition can however be unfavorable during
financial crisis. The authorities responsible for regulation of competition must be proactive in
designing as well as implementing appropriate exit strategies (Byrnes & Bloink 2015: 64-65).
2.7 Standardization and disintermediation

The internet plays a crucial role in elimination the full-service financial brokers also called the
middlemen (Brown & Kimbrough. 2011: 540). In the previous scenario of financial market
business transactions, brokers were an important ingredient of financial transactions through
intermediating between the markets and the customers (Byrnes & Bloink 2015: 65). In the
contemporary scenario therefore, the orders are received in the market directly by the customers,
leading to two critical consequences. In the first place, there were some specialized information
that the brokers could get exclusively to serve large clients but it is no more available. Secondly,
there is a high degree of standardization of the products that are available in the market which
escalates liquidity even more. The network has facilitated that, two markets that offer identical
products which initially used differing specification in trade can now be accessible in the market
at the same time (Byrnes & Bloink 2015: 65). This translates to a single market that is
characterized by a high degree of liquidity coupled with an escalation of standardization.
2.8 Transformation of the legal norms
The internet is controlled by uncertain regulations because crucial questions concerning the laws
on intellectual property together with the contract remains unanswered. The same case applies to
matters relating to application of transnational laws (Burks, 2011: 621). The internet is associated
27
with significant conflicts with regard to the international business laws, the privacy laws in
addition to intellectual property among different countries. The nature of the internet has
facilitated in the creation of innovative products whose application permeates different
geographical boundaries. The international as well as the national laws of different countries are
therefore incompetent in addressing such situations (Burks, 2011: 622).
2.9 Privacy and security
The nature of the internet from the perspective of its creation is a basic network having an
inferior security although it potentially supports secure as well as sophisticated communications
(Abernathy, Herrmann, Kang & Krishnan, 2013, 3 and Brown & Walter, 2013, 47). The original
design of the internet was intentionally meant for loose integration in the interconnected
computers that used a variety of operating systems in their operations. The contemporary internet
permits simple unauthorized accessibility of data to the proprietary users and also the more
sophisticated and precautious users. Surprising, the greater proportion of the users of this
technology have limited knowledge about potential security threats posed by the internet to
private data (Abernathy, Herrmann, Kang & Krishnan. 2013, 4 and Brown & Walter, 2013, 48).
The internet allows a two-way communication and if blocking private data access through
sophisticated protocols and encryption, a significantly high insecurity remains a feature of the
internet.
The greater majority of organizations gather intricate information concerning transactions made
by other people via the internet with anticipations that the data is reliable in advertisements to the
same people (Brown & Kimbrough, 2011: 542). Personalized ads can be used as target to
28
produce a huge impact on the basis of past behavior of the person. Little evidence is available to
indicate the success associated with personalized ads, though in the future the status quo may
change (Brown & Walter, 2013: 50). Additionally, there is limited evidence of the business cases
in gathering a huge amount of data on personal behaviors via the internet although the issue is
associated with notable privacy concerns (Brown & Walter. 2013, 50 and Abernathy, Herrmann,
Kang & Krishnan, 2013, 4). The data on transactions that may be considered as private such as
monitoring and activity involving trading in a specific stock or reading a newspaper can also be
regarded as a property belonging to specific vendors, such as the web servers owners who are
the actual facilitators of such activities. In the US for example, individuals have become
accustomed to higher echelons of legal protection of their privacy when engaged in a phone
conversation. The same case requires to be introduced in the activities transacted via the internet
as well as through the electronic mail. The conflicts associated with privacy due to the use of the
internet have been a common phenomenon in the cyber space regulations (Brown & Kimbrough.
2011, 50).
2.10 Information overflow

The contribution of the internet in the flow of information is overwhelming and great strides of
success have so far been achieved (Arora, Richardson & Tuna. 2014: 365). The managers in the
financial institutions and the consumers are beleaguered by the high profusion of data that can be
retrieved through the internet. The information is so immense that the parties mentioned cannot
fully utilize or deplete that data that they can access from the internet at one particular time
(Arora, Richardson & Tuna. 2014: 365). There is therefore a need to filter such information to
achieve efficiency in the use of such information. Identification of the most suitable tools for
29
filtering this information is therefore crucial and interfaces such as the hierarchical systems of
classification and search engines can be considered for this purpose (Arora, 2013 and
Abdolmohammadi & Read, 2010: 366). Lack of efficient tools of this nature will lead managers
in the financial markets as well as the consumers to the brand names as well as the rules of
thumb that aid in the selection of resourceful information. The financial markets therefore must
be keen on the next phase of the internet that is characterized by interfaces as well as information
filtering (Abdolmohammadi & Read, 2010: 7).
2.11 Conclusion
Internet based communication technologies initiated the development of wares, and interaction
systems which are traded over the internet. For instance there are accessible digital goods that
can be bought and sold over the internet which include music, movies, software, printed
information, music, movies and or any other product that can take the form of a digital product
(Kremer, 1993: 682). These forms of trading are less expensive and yet efficient when compared
to conventional models of delivery. The aspect of value enhancement is pronouncedly visible in
Internet based technologies owing to the fact that it is accessible through search engines (La
Porta, etc., 2000: 66).
CHAPTER 3: Research methodology
This section generally frameworks the chosen strategies and specialized parts of the
study. The strategies will be the distinctive practices and methods used to gather and inspect the
data. This will derive of surveys, perception and meetings and also both quantitative
(measurable) and subjective (non-factual) investigation methods. (Saunders et al., 2009: 66). The
research problem entails the specific issue or problem that will be the focal point of the
examination being done. At the point when touching base at this stage various suitable
30
exploration inquiries will be created. (Collis and Hussey, 2009: 87). The research problem in this
dissertation will identify whether internet based communication have an influence towards
international financial markets.
Chapter 3: METHODOLOGY
3.1 Research hypothesis
To guide the researcher in the study, it was prudent that the research hypotheses were designed to
effectively address the needs of this research.
1. The use of Internet-based communication technologies is positive for increasing their
return on investments and, hence, collecting larger revenues.
2. The influence of internet-based communication helps in ensuring effectiveness on the
3. The predictability of financial markets based on internet based communication.
4. The use of internet based communication technologies is effective in ensuring global
communication among financial investors
3.2 Philosophical considerations of the research

The research took into account the philosophical limits of the study from an ontological
perspective. In this regard, the researcher justified the use of objectivist- oriented philosophy due
to the fact that the phenomena under investigation were naturally objective. This means that the
activities in the financial markets industry coupled in interactions among the stakeholders
through the internet was a common feature among the relevant players in the industry. The
31
researcher also accounted for the epistemological perspective arguing that, positivist thinking
was bound to be prevalent in this research.
3.3 Research Strategy

The researcher employed secondary research through investigating impact of internet-based
communication technologies on the development of the different financial markets. The
researcher relied on Wall Street Journal market data and the Internet World Stats available at the
website named(http://www.internetworldstats.com/stats.htm) to get the information concerning
the use of the internet among the participants in the financial markets. This data was very
important in highlighting the trend of how internet is used in the financial markets. The data was
applicable for analysis of data for the sake of this research because it provided an indepth
analysis of the secondary data analyzed.
The use of secondary research in investigation the impact of internet-based communication
technologies on the development of the different financial markets did not require much time
from the investigator and this was an advantage that was highly cherished. It led to collection of
substantial information from a variety of sources in a shorter duration of time relative to the
primary research (Collis & Hussey, 2009: 89).
3.4 Research ethics considerations
The researcher found it critical to account for the ethical issues that arose in the course of
executing every step in this investigation. In this regard therefore, the researcher was extremely
keen on the standards of academic honesty as well as integrity, and also giving the investigation
32
the ethical focus that it deserved. The researcher also excluded the contribution of unauthorized
academic help as well as business research agencies so that the highest standards of integrity and
honesty could be ascertained. The researcher was also keen on data interpretation to avoid any
form of bias and made sure that a neutral position was maintained in the process. The researcher
was also careful to avoid giving special preferences and favors to particular ideologies that
formed the bases of findings, conclusion as well as recommendations in this research. Any form
of academic misconduct was avoided during the course of this research.
Another area that required careful consideration with regard to ethics was collection of the
secondary data. The researcher did not require any permission or payment of fees to access the
information from internet websites that was used in the literature review section of this research
work. However, it was prudent to give credit where it was due. This was achieved through
appropriated acknowledgement of the authors as well as the publishers of such information so
that the highest echelons of originality and authenticity of the information in the literature review
was achieved. The information gathered in secondary approach to this research was adequately
pigeonholed and the study was maintained within the finest limits of the researchers knowledge
and capability.
CHAPTER 4 RESULTS AND FINDINGS
The results will be discussed based upon the variables discussed in the previous chapter.
4.1 Introduction
In regard to the analysis pertaining secondary data, it was crucial to ascertain availability,
accuracy and relevance of updated data, similarity of measuring units and concepts. More so, the
exercise called for analysis of margin of error, dependability of source as well as adequacy of
33
information. The secondary data focused on the stock brokers within the financial markets.
According to information collected from www.internetworldstats, stockbrokers obtain required
information through internet access. This can be summarized in Table 1 below
Table 1: Internet access - Locations
Access to the Internet
Computer laboratory
Office
Place of work
Home
Cybercafe
Office & cybercaf
Total
(Source: Internet World Stats)
Number
0
3
10
3
52
2
70
%
0.0
4.3
8.6
4.3
88.6
2.8
100
4.2 Analysis of Hypothesis 1

The use of Internet-based communication technologies is positive for increasing their
return on investments and, hence, collecting larger revenues.
Majority of the non-network markets have no significant competition. However, in the market
structure under the investigation dealing with financial transaction, there is unprecedented
increase in the level of communication (Mcmillan & Schumaker, 2001: 787). According to
contemporary scholarly opinion the scenario is not possible in the traditional economies (La
Porta,et al. 2001: and Aboody, Johnson & Kasznik, 2010: 320).
The introduction of internet technology gave rise to evolution in communication which further
brought about immense benefits that can be praised for today advancement in the financial
markets (Aboody, Johnson & Kasznik, 2010: 321). Before the introduction of the internet, the
34
best bet of a retail investor was to visit a library where they could read financial literature,
conduct an investigation on companies and the securities available including bonds, stocks as
well as mutual funds. The retail investor could also consider another option of making direct
inquiries from the organization. However, this was a rather expensive approach as result of the
need to post financial reports of significantly large size and the procedure was also time
consuming (Aboody, Johnson & Kasznik, 2010: 321-323). The report was printed manually and
posted by investor relation department of the organization and this translated to a longer wait
time for the retail investor. The figure 1 (source of investment information) below shows how
internet as a resource gave rise to communication and the benefits associated with it. The figure 1
illustrates how internet is ranked globally in terms of disseminating information to investors.
Quite a large number use this tool to share information with the public.
(Source: IR Web Report, 2015)
35
Investors can now easily access financial reports of different companies online through platforms
such as Securities & Exchange Commission, SEC and this information is accessible to the
investor within seconds after positing in the website (Aboody, Lehavy & Trueman, 2010: 322).
The investors can also use distinctive key words, specific topics and financial statement to search
and then download huge financial documents in relatively short time. The organization on the
other hand has been cooperative through maintaining investor relations pages online and the
filings are accessible by potential investors (Aggarwal, Cao & Chen, 2012: 405). There has also
emerged a big number of websites that compile and maintain financial data of different
organizations and make them accessible to the investors for further analysis and understanding.
The influence of internet-based communication helps in ensuring effectiveness on the
According to the previous scenario in this industry, the financial intermediaries including
investment managers and brokers enjoyed a privileged position over the investors (Aggarwal,
Cao & Chen, 2012: 408). The intermediaries were exposed to more resources that facilitated
access to huge volumes of financial reports from organizations and were usually paid a fee to
conduct a security analysis. This situation has been overturned as a result of emergence of free
websites that offer critical financial information and for the specialized data, a small fee is
charged for access (Allen, Larson & Sloan, 2013: 119).
The internet has made a great contribution in lowering the cost of doing business in the financial
markets through reduction of costs and fees to the investors. The retail investors for example
36
have observed dramatic decline in the rates of commission that they used to pay for the trade
securities. In the current scenario, brokers charge as low as 10 $ in terms of commission for a
stock exchange trade (Aboody, Lehavy & Trueman 2010: 324).
The internet has improved the means of communication to offer solutions in interaction between
economic agents. Exchanging financial instruments and corresponding physical commodities
have been enhanced through internet based communications. The contingent claims that are
associated with these transactions can also be submitted through online platforms in securities
trading (Kelly, 2010: 112). A good number of markets have been created and improved through
enhanced online trade. Popularization and development of forums facilitates for convenient
discussions on financial markets by analysts and stakeholders. The figure 2 (internet penetration
rate by region) illustrates the rate at which internet service provision has penetrated into different
regions around the world.
37
(Internet World Stats, 2015)

Before the discount brokers were available in the market, the full-service brokers took the
advantage of scarcity to exercise their forceful control in the market and their charges were too
high that the current market can consider them as exorbitant rates of commission. To illustrate
this scenario, we consider an article that appeared in Money Magazine in 1992 that documents
that, shortly before the emergence of the internet in the consumer market, one full-service broker
charged a commission rate of 2.5 % for a single stock trade. Through calculations, this translates
to $ 250 for trading 100 shares where each share at 100 $ (AbuGhazaleh, Qasim & Haddad,
2012: 4).
The use of electronic networks which is able to transmit information via internet piping has been
a source of benefit to traders in the financial market. The high frequency buyers and sellers have
38
attracted immense controversy due to their habit of trading stock market of above average that is
perceived as volatile (AbuGhazaleh, Qasim & Haddad, 2012: 5). But on the other hand, the
traders in this category have also received credit due to the reduction of bid-ask spreads that
implies to the different cost at the time of buying, also called bid price, and selling, also called
ask price a certain security.
The predictability of financial markets based on internet based communication.
The benefits of using the internet in trading on investing are based on three factors. One of these
factors is transparency that also means the capability of a wider investor base to effectively
conduct information analysis leading to independent conclusions on the best strategies for
pricing securities. It can also assign a definition to differential pricing which challenges the fullservice brokers who usually charge exorbitant prices before these prices were dramatically
lowered by the advent of the internet (Allen, Larson & Sloan, 2013: 122). These charges were
mandatory to the institutions if any transaction was to be executed. The third one involves
disintermediation that implies that an investor can effectively bypass the full-service brokers as
well as advisors in acquiring relevant information and executing the actual transaction while
trading on securities. The figure 3 (financial market analysis) below illustrates financial
investments online throughout the years. The time limit indicated is from 2000 upto 2015.
39
(Source: IR Web Report, 2014)

The emergency of the internet brought about power to individual traders in the financial market,
leading to a profound implication to the strategies applied by the investor in accessing crucial
financial information (Adelopo, 2011: 340). On the same not, the internet also brought the merits
of significant cost reduction to the participants in the industry.
The internet was therefore the cause for fundamental transformations in the financial markets
(Allen, Larson & Sloan, 2013: 123). Other technologies also contributed significantly in this
transformation. For example, the introduction of the telegraph created the space for construction
of new networks. In most cases, the effects of new technology application in the financial
markets was unexpected and tremendous and necessitated for installation of new structures in the
financial market (Allen, Larson & Sloan, 2013: 124). This can be illustrated using the ultimate
predominance that New York Stock Exchange enjoyed over the Philadelphia Stock Exchange as
40
a result of liquidity considering that the orders that New York attracted were done through the
telegraph. The removal of the telegraph in the scenario resulted to an equal standing by New
York Stock Exchange and Philadelphia Stock Exchange. On installation of the telegraph,
supremacy was recorded by one of the institutions. Yet another illustration can be used to prove
the implications of transformations associated with the introduction of the internet, this involve a
technological change that involved the use of mathematical formulas in pricing of options. This
triggered a proliferation of derivatives in to the financial market. The two illustrations can help
arrive at deductions that innovative technologies in the industry is most likely to bring about
some impacts. The internet has persisted in the market for about a decade and the impacts of the
technology are well felt by the stakeholders (Adelopo, 2011: 341). The future prospects are that
the technology will have far reaching effects in terms of transformation in business operations as
more and more people adopt the technology. According to the possible projection, it is
anticipated that, advancements in the use of internet technology in the financial markets industry
to serve as a tool for instant communication shall assume the same trend as did the telegraph
many years in the past (AbuGhazaleh, Qasim & Haddad 2012: 7). At the moment, the internet
has so far contributed to immense implications in the operations of financial institutions
everywhere in the world. It is therefore anticipated that this technology will fully transform this
industry and enhance performance.
The most important accomplishment that is associated with internet technology is facilitation of
effectiveness in the flow of information between two parties, the sender on one hand and the
recipient on the other (Wright, 2008: 156). Virtually all financial exchanges as well as financial
intermediations in the financial market industry involve information exchange between the
players (Tobias, Moat & Stanley, 2013: 1684).
41
The internet offers an opportunity to the customers as well as the service providers to manipulate
software solutions as well as interfaces in information exchange and dissemination as well as
analyzing the available information to arrive at informed decisions. Another important merit that
has been linked to the emerging technology in the financial market is enhanced interaction
between players in the financial markets industry (Kelly, 2010: 38).
By viture of the fact that the internet is a flexible digital system, it stands out to be the most
essential transformational tool of financial market operations.
The internet has also contributed to improvements in the market through online platforms. The
forums have been extensively popularized and developed making it possible for the participants
in the financial markets to discuss issues that affect the stakeholders in the industry. Economic
agents in the financial markets can also interact among themselves relatively easily as a result of
making full use of the technology (La Porta, Lopez-de-Silanes, Shleifer & Vishny, 2000: 22).
This is based on the fact that the internet is an international platform with no geographical
barriers. It is therefore possible to transact any business in the financial market without
limitations posed by the national borders. In this regard therefore, the state as well as local
financial jurisdiction has been rendered irrelevant for participants conducting global business in
the financial markets (Tobias, Moat & Stanley, 2013: 1684).
42
(Internet World Stats)

Technology has always engineered operations in financial markets (Blau, Van Ness & Van Ness,
2009: 7). For instance the milestones achieved in the development of financial market can be
credited to the adoption of the telegraph. The telegraph revolutionized the structure of financial
markets as witnessed in the historical events witnessed in structuring financial markets. For
instance the historic primacy of the New York Stock Exchange was incomparable to other stock
entities in terms of orders collected, and the success is attributed to orders received by virtue of
integrating the telegraph. Supposedly, the fact that the telegraph did not exist then the New York
Stock Exchange would have an equal trading with other stock dealers like the Philadelphian
stock exchange.
The Internet-based communication solutions are also viewed as a facilitator of relations between
the agents of economic processes. The Internet-based communication solutions enable accurate
43
and speedy delivery of financial processes which are submitted by means of online-based trading
platforms (Kelly, 2010: 78). As a result there arises a possibility of creating, enhancing and
negotiating business among financial markets and stakeholders online.
The development of Internet technologies facilitates accessibility of for the economic

representatives to the financial markets owing to the fact that the Internet is international
network. This aspect listed above can be transacted from any part of the globe a factor that has
continued to stimulate financial processes across international businesses (Tobias, Moat and
Stanley, 2013: 1684).
Of all technologies the internet is most integrative owing to the fact that it is a global commercial
network which is has already impacted on financial markets and is expected to continue financial
markets. It is worth admitting that the presence of the internet based communication is
fundamental in evaluating processes geared towards enabling financial solutions. This is made
possible by the availability of software tailored towards facilitating swapping of information, its
propagation and scrutiny (Huesemann & Huesemann, 2011: 67).
The internet-based solutions also facilitates in eradication of discriminations in pricing on the
geographical grounds. It is also worth noting that, the price competition among the
manufacturers along with the providers of standardized goods and services generally appreciates
in value as a result of mass internet usage (Wright, 2008: 78). The ability of Internet to help with
collecting and analyzing pricing information from the hundreds of sellers effectively dwindle the
costs of search, while it intensifies competition in terms of price among the different service
providers (Huesemann & Huesemann, 2011: 69). It is also notable that, the internet has
44
facilitated in the full elimination of any kind of geographically focused price discrimination by
the same service provider.
As a result those tools that were only available within the trading fraternity were liberalized to all
those wishing to participate in financial trading. Internet solutions impacted on businesses in
variant measures; to the experienced financial traders it became an effectual instrument which
propped up their return on investment. But on the contrary, the uninformed contestants viewed
Internet-based solutions as a delicate solution which easily brought losses. In a word internet
trading solutions and technologies characteristically increased market volatility owing to the fact
that majority of the trading community boarded the technology (Tobias, 2013: 1684).
Internet-based solutions had a vast contribution in harmonizing pricing on geographical grounds
by getting rid discriminations linked to pricing. It was witnessed that Internet-based solutions
sparked competition among business players as a result of internet usage. The Internet
technology enabled collecting and analyzing price data, a situation that intensified competition in
terms of price among different service providers. Moreover, internet solutions have unified prices
that were in the past geographically different despite the fact that they were designed by the same
provider (Wright, 2008: 46).
The virtual network breeds network externalities by means of selling a given component in large
numbers which encourages larger availability and consequent sale of complementary
components which eventually hikes the value of the component. Eventually owing to the users
overdependence in a component there arise a possibility of positive feedbacks. This is practically
what happened to Windows which has plenty of Windows compatible applications which have
subsequently propped up the value of Windows. This scenario is not exceptional in the financial
45
exchange market where availability of large quantity of orders from both the buyers and sellers
reduces the variation of projected price and as a result increases the payoff of traders (Wright,
2008: 46). As a result, extra liquidity is realized in the market thus increasing the volume
variation among financial exchanges. Economic theory indicate that markets that have
established strong network externalities like financial exchange markets aided by the Internet
structure are more likely to enjoy the benefits of winner-take-most since most transactional
processes are done online. These markets have an obvious and extreme market share and profits
disparity meaning that a business entity can enjoy a threefold volume of the market share
enjoyed by the second largest entity (Wright, 2008: 46). The second largest entity can embrace a
threefold volume of the market share enjoyed by the third largest entity and the sequence trickles
downwards to the insignificant entities which share a tiny portion of the market share.
The internet based business is no different from any other form of business where the business
environment demands that every business strive towards achievement of the greatest share
possible with regard to the prevalent activities in that particular environment (Tobias, Moat &
Stanley, 2013: 1684). This is a peculiar market oriented dominance that gives the smaller
organization in the market limited opportunities for survival. In addition to this consideration,
uncertain demerits exists among the significantly larger organizations which are magnified as a
result of the internet based solutions that shield them from the that were associated with the
egalitarian market components of the past (Wright, 2008: 78).
The externalities that are associated with the internet are crucial aspects that require accentuation
in as far as this research is concerned. In more specific terms, the components that are attributed
to a particular product have a higher propensity of augmenting the values of complementary
46
elements and offer a higher echelon of constructive feedback in as far as that particular product is
concerned (Bradshaw, 2011: 123). This can clearly be illustrated by mentioning the numerous
software packages in the contemporary market place that are compatible with the operating
system of Windows. The software increases the relevance and significance of windows in the
market (Mcmillan & Schumaker, 2001: 788).
The financial markets industry is characterized by profusion of orders on the market externalities
which lead to automatic decline of variance of the anticipated prices, which in turn escalates the
traders payoff. As a result of such a scenario, extra liquidity is introduced in such a market
which translates to equality of the players in financial exchanges. According to the contemporary
economic theory together with suitable empirical observations, the strong network in the
financial markets leads to a situation of typical "winner take most" markets (Taleb, 2005: 56).
Their main features that these products offer are differentiated by great magnitudes (La Porta,
etc. 2000: 8).
A wide range of content is available on demand in the Internet, and can be accessed using any
digital device that is tailored to convey networking, creative participation and user feedback.
These platforms are designed to enhance interaction in both social and economic circles through
web-platforms like blogs, or wikis, online newspapers, video games, and social media. The
underlying purpose for these platforms is dialogue enabled via connection and conversation to
enable people to comment, share, and transact a wide variety issues. In a word the internet
technology is designed for the interactive community as an ideal means to make the world a
global village. This can be illustrated in the figure 5 (importance of internet in financial markets)
below. The figure 5 indicates how internet is used by investors both by the use of electronic
devices as well as print media.
47
(Internet World Stats)
Most of the internet technologies are digital thus they can characteristically be manipulated,
compressed and interactive. Good Internet examples include computer multimedia, video games
websites DVDs, augmented reality and CD-ROMS. The internet has created new interactions
and processes since Digital Data are controlled by Software which is the language of the internet.
The internet is based on the theory that objects that rely on digital representation and are
delivered by means of a computer do share some common qualities. Thus digital data is
manipulated by software which enables the creation of several versions of the same object.
The use of internet based communication technologies is effective in ensuring global
communication among financial investors
48
Internet technology has increased communication between people and business institutions
globally giving people an opportunity to interact. The result of the internet revolution is
globalization which is defined as expansion of activities beyond the boundaries of particular
nation states. Through the enhancement of the electronic communication distances are shortened
between people and they get an opportune chance to expresses their t great development ideas.
This technological milestone invalidates the link between physical and social place. Thus
removing the impedance associated to physical location makes social relationships and
interactions more possible, a situation that is responsible for the rapid growth of the social as
well as the economic arenas (Croteau and Hoynes 2003: 311).
Virtual communities continue to thrive owing to the online system which and rise above
geographical boundaries, a situation that eliminates social restrictions. As a result, globalised
societies are born which have well structured self-defined networks that replicate real life
experiences. In one word, participants of virtual communities have a platform to argue, fit into
place intellectual discourse, carry out commerce, brainstorm and do much more as in real life.
The fundamental argument is that technology is a strong driving force of economic as well as
social issues thus it is a major determinant in the process of globalization.
It has however been acknowledged (Collis & Hussey, 2009: 89). that the increase in the number
of competitors in the network financial markets industry does not necessarily transform the
prevailing market structures. Based on the arguments postulated by different scholars, there is
unanimous consensus that in an existing tripoly state in the financial market, addition of the
fourth market participant produces no significant change in market prices, shares profits and
other metrics (Castells, 2002: 344). This is also applicable in the situations of free entry.
49
On the same note, the existence of a natural equilibrium in the network economies on the basis of
principle winner-takes-the most is especially significant. However, it does not automatically
signify that the competition is weak in this situation. In contrast, the competition in this area of
the economy can be regarded as extremely intense, especially in the light of the fact that the
network can be associated with the creation of an expansionary effect (Mumford & Winner,
2010: 78), providing ample opportunities to buy the goods cheaper and easier. Hence, the size of
the markets expands.
On the contrary, according to the greater majority of the non-network markets, the market
concentration together with intensification of competition increases simultaneously (Mcmillan &
Schumaker, 2001: 787). The contemporary scholarly opinion indicates that this scenario is not
possible in the traditional economies (La Porta,etc., 2001: 8). However, it is an obvious fact that
in digital markets has a feature of market concentration that accompanies compensation
intensification. Intensity of competition is a motivator for innovation especially with the smaller
competitors. This is crucial so that they can force their way in to the market despite the strain
they receive from the competitors with intentions of removing them from the market (Bdard,
2011: 67).
The internet is therefore a special facilitator of smooth information flow that leads to
intensification of competition as well as a promoter of winner-takes-most world (Arora, 2013:
78). The internet can also be associated with serious threats to organizations, systems, processes,
markets, supply, exchanges as well as mechanism of distribution which have enjoyed the
protection from intensive international competition that are attributed to regulatory rules,
national borders as well as geographical positioning. The internet has forcefully pulled the
50
financial markets to a regime of inequality as well as highly intensive competition. There is a

baggage of surprises that can be attributed to the internet (Arora, Richardson & Tuna, 2014: 67).
It results to rapid business expansion and commercialization. The internet also offers marvelous
promises with respect to innovative services and goods as well as processes.
You looked at the 4 hypothesis but perhaps each of the parts relevant to each hypothesis should
start would re-stating the hypothesis and be finished with the conclusion of your findings in the
relation to the hypothesis in question.
CHAPTER 5 CONCLUSIONS
5.1 Conclusion
The financial services, and most importantly, trading in the stock markets can be considered as
priority killer apps as far as the internet is concerned. Way back 1996, an estimated 1.5 million
accounts of financial markets brokers were documented, this number escalated to 5.3 million by
1998. This figure hiked even further to 14.4 million in 2002 and the trend of upward appreciation
has been continuous since then (Aggarwal, Cao & Chen, 2012: 410).
Enhanced cost straightforwardness will typically support buyers, prompting expanded consumer
excess, to the detriment of producers, who will need to make extra interests in administration,
differentiation or maintenance, or update items on a more regular premise to balance expanded
customer informedness. This will be an expense of doing business, a prerequisite for managing
better educated clients who search at their best cost and better educated contenders who precisely
set their own particular costs. These strengths will tend to build costs in these enterprises,
51
prompting the likelihood that measured efficiency really diminishes, despite the fact that it will
be in part counterbalanced by cost investment funds open doors that the Internet may give. In
different businesses where these counter techniques are impractical, firms must package other
high edge items (in ways that can't prompt astute pickoff or unbundling), which have less
straightforwardness or persevere through a managed time of lower benefits.
Financial market users have been documented as heavy consumers of IT and this trend is
projected to improve in the coming years. Higher echelons of innovative users are projected to
transact business in securities markets as a result of improvements in online brokerage
(Aggarwal, Cao & Chen, 2012: 409). It can be acknowledged that, information technology based
on the internet forms a special part of day to day activities in the mainstream society. Smart
phones have made internet so multifunctional that information technology is part and parcel of
daily life in contemporary society. The continuous availability and mobility of information
leading to enhanced interaction as a result of the accessibility of the internet has increased the
blur boundary between the real and the virtual world leading to a development of new response
as well as behavioral patterns among the users.
The financial markets face imminent an unforeseeable though dramatically growing potential for
innovative contact points, business models as well as services which are a source of both
opportunities as well as risks to their business (AICPA, 2012: 3). The potential opportunities
relate to complete repositioning of the organizations involved in financial markets business in
consideration of customer relationships through a consistent focus on the needs of the customers
aided by new technology. On the other hand are the risks which are attributed to competitors who
52
are likely to perform better and faster business in a way that is attractive to the customers as well
as in a customer oriented approach. This therefore translates to loss on the long standing as well
as loyal customers.
Digital transformation is constantly permeating entirely all aspects of social activities in the
human life. This leads to emergency of new business models together with disruptive changes
that create more opportunities and at the same time, they harbor immense risks that are a great
danger to the already established actors in the financial market. The success of an organization
together with their experience in a particular field is now becoming irrelevant in guaranteeing the
sustainability of the business in the market together with its competitive edge.
The unprecedented transformations brought about by the internet forces the organizations in the
financial market to adopt new perspectives in their business processes, the markets and also
thinking beyond the box. The organizations that aspire to sustain their performance in the future
must adopt the digital culture and harness it effectively for the benefit of the society and the
company at large. The organization must establish the most suitable groups in the society who
can contribute to progressive interactions through the use of the internet for the organization to
remain relevant in the market.
You conclusion need to complete in relation to your finding. Also at no point do your return to
the research questions that you have set up, which indicated that you need to be clear as to what
you are setting off to do in the beginning of your work.
5.2 Limitations of this research
53
The researcher had an obligation of addressing the challenges and limitations in the study which
posed a significant danger to the quality of the findings. It was the aspirations of the researcher to
address all pertinent issues in this investigation but success in this endeavor was restricted as a
result of the limitations. The first issue that the researcher had to deal with is data availability
since the results were based on the available data in the public domain. The greater majority of
the information that is academically interesting was under protection by a corporate veil that was
very difficult to penetrate (Wright, 2008: 99).
Another limitation was based on the nature of this investigation. The field of this study is
information technology and it is under dynamic evolution day in day out. The findings of the
investigation were therefore based on the information that was available at the time of
information gathering. Any changes in the field cannot be captured in the findings of this study.
There are also further evolutionary changes in the near future and this fact ay render the findings
of this research as obsolete soonest the new information is published after a technological
breakthrough (Aggarwal, Cao & Chen, 2012: 406).
The process of information gathering was time consuming and difficult times were inevitable. It
was the aspiration of the researcher to gather the highest quality of information but the goal was
hindered by the unavoidable limitations and challenges. The use of secondary information was
also another practical limitation that affected the quality of the findings that were documented in
this study. Some of the information available from website were out of date and non valid. This
meant that, although the researcher made a wide exploration of information sources, it was
difficult to judge the most suitable, valid and up dated information appropriate for documentation
in this study. However, the researcher was extremely keen on the limitations and all efforts were
done to minimize the hazards associated with the challenges.
54
CHAPTER 6 RECOMMENDATIONS
Further research in this field of the contribution of internet technology is required owing to the
fact that, this is a dynamic field. Innovations in the field of information technology are issues of
day to day and more and more progress is being made in this field. Researchers are encouraged
to take the initiatives for further investigations in this field due to the fact that information is still
insufficient since not much current studies have been explicit in determination of the impacts of
internet technology in the financial markets. The consumers of services in financial markets
industry can be encouraged to embrace the merits of this technology to increase convenience,
effectiveness as well as efficiency in the way they transact their business. On the other hand, the
service providers have a duty to play in enhancing the structures and the frameworks that
facilitate full utilization of technology by their clients.
55
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1

THE EFFECTS OF INTERNET-BASED COMMUNICATION ON THE FINANCIAL

Results and findings

The internet-based communication is unsettling long-established models of business in regard to

1.2 Problem statement

To determine the influence of internet-based communication on the international

Chapter 2: LITERATURE REVIEW

2.1 Theoretical perspective for internet-based marketing communication

2.1.2 The model of relationship marketing

2.2 The direct resultant impact of the Internet technologies

It is therefore vital to emphasize on network effects or externalities as an indisputable concept in

2.7 Standardization and disintermediation

2.8 Transformation of the legal norms

2.9 Privacy and security

2.10 Information overflow

3.2 Philosophical considerations of the research

3.3 Research Strategy

4.2 Analysis of Hypothesis 1

(Source: IR Web Report, 2015)

(Internet World Stats, 2015)

(Source: IR Web Report, 2014)

(Internet World Stats)

The development of Internet technologies facilitates accessibility of for the economic

(Internet World Stats)

financial markets to a regime of inequality as well as highly intensive competition. There is a

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