To meet ever-increasing competitive pressures, markets in London, Paris, Toronto and Tokyo have modernized. The extensive automation of trading on the London Stock Exchange, for example, has enabled it to expand its listings of foreign securities significantly. In response to competition from London, the Paris Bourse established a fully electronic trading system between 1986 and 1989. The Toronto and Tokyo exchanges have also adopted electronic trading systems.

Automation increases market transparency and anonymity, but too much transparency may discourage trading, as investors do not want to signal their trading needs. Too much anonymity may also damage market liquidity if it hampers market-maker’s ability to establish reputations and attract order flows. Some markets have introduced refinements that reduce both transparency and anonymity.

In general, however, the lessons from abroad suggest that markets and market participants are on the road to greater automation and attendant increases in market transparency and anonymity. Along the way, they will have to address the limitations of automation. In particular, they will have to find ways to facilitate limit orders and to provide special provisions for very large and very small trades.