Common message standards for electronic commerce in wholesale financial markets

An important aspect of electronic commerce is the potential for market participants to automate transaction processing fully, from the point of trade to final settlement. Several market-led initiatives to develop common standards have made substantial progress. But many trade messages are still sent by fax or using incompatible electronic networks, which means that different participants may have to re-input the same data manually at various points during the trade process. Some of the initiatives to establish common standards are described. Economic theory is then looked at to explain why market participants may find it difficult to coordinate to introduce a single standard, in spite of the wider beliefs. How such technological changes may affect market structure is discussed.