Electronic trading
From Wikipedia, the free encyclopedia
Electronic trading is a mode of trading that uses information technology to bring together a buyer and a seller through electronic media to create a virtual market place. Markets such as the new age stock exchanges are prime examples of electronic market places.
Historically, stock markets used to be physical locations where buyers and sellers met and negotiated. However with the improvement in communications technology, the need for a physical location no longer is of any importance as the buyers and sellers can electronically exchange indications of interests as well as negotiate from a remote location.
Not only are these markets in tune with the current developments in information technology, but they are also easy to monitor and manage. These are major drivers for most market regulators to insist that all markets eventually must be developed electronically.
NASDAQ, set up in 1971, was the world's first electronic stock market. It took 35 more years for the NYSE to automate its trading process but it is now clear that the days of exchange floor trading are coming to an end. In fact, by early 2007 organizations like the Chicago Mercantile Exchange were creating ETrading Platforms to support the emerging interest in trading within the Foreign exchange market.
Today many investment firms on both the buy and sell side are increasing their spending on technology for electronic trading. At the same time many floor traders and brokers are being removed from the trading process. Traders are relying on algorithms to analyze market conditions and then execute their orders. Dates of introduction of electronic trading by leading exchange in 120 countries is provided in a Journal of Finance article published in 2005 “Financial market design and the equity premium: Electronic vs. floor trading,”. Leading academic research in this field is conducted by Professor Ian Domowitz and Professor Pankaj Jain.[citation needed]
[edit] See also
- Electronic Communication Network (ECN)
- Straight Through Processing (STP)
- Grid computing
- Algorithmic Trading Platforms
- ETrading
