How Is Technology Affecting Global Trading Markets

Being able to enter and execute stock trades on a smartphone application is something we can easily take for granted these days, which is impressive simply because this was not even remotely possible a couple of decades ago. Technology has always been at the forefront of innovation in the financial markets; we can’t forget that the stock market we know today as the Nasdaq made its debut in 1971 as the first electronic trading platform open to ordinary investors. Before that, all transactions had to be cleared with a personal broker via a telephone call. And individual transaction fees were much higher. Prior to May 1, 1975, brokerage commissions were regulated by the government and kept artificially high. In those days, buying 100 shares of a blue-chip company could cost $100 or more in commissions.

Deregulation opened the door to the discount brokerage industry. Ordinary investors no longer needed a personal stockbroker to make stock recommendations… they could make decisions themselves. This new idea was embraced by Charles Schwab, making them the first discount brokerage. They still had stockbrokers, but when you called, you just got the next broker available, and they would place your trade for you, but they didn’t make individual stock recommendations.

Dynamic Personal Banking Options

In 1933, in the wake of the stock market crash of 1929, Congress was trying to affix blame and prevent another market crash, so they passed the  Glass-Steagall Act (GSA), which separated investment and commercial banking activities.  This prevented banks from selling stocks and brokerages from having bank accounts. This restriction was finally lifted in 1999 under the Gramm-Leach-Bliley Act.

Individual investors no longer need to keep separate accounts for trading and personal banking. Changes in financial regulations have paved the way for major retail brokerages such as Fidelity and Schwab to provide personal banking services directly or through a financial institution partner. Being able to clear money transfers instantly allows you to do things like taking trading profits from your Fidelity account and moving them to your money market account linked to a debit card.

Improved Speed of Data Transmission

In the beginning, trading was done by shouting in a room on Wall Street. Just like in the classic movie Trading Places with Eddie Murphy.  Nowadays, you can trade stocks via the internet with the press of a button or two.

Modern financial markets move at high speed, enabled by underlying data transmission technology. Fiber-optic broadband and 5G wireless networks allow data to be transferred instantly, and the costs to access these networks have become more affordable for all market participants as the technology becomes more widely available. Faster trade settlement has enabled higher trading volumes.

In 2006, the NYSE merged with Stock market operators Archipelago (Arca) to create an electronic stock and exchange-traded product (ETP) order matching platform called NYSE Arca. The exchange specializes in “ETP listings”, which include exchange-traded funds (ETFs), exchange-traded notes (ETNs), and exchange-traded vehicles (ETVs).

These days you can also trade Crypto-currencies like Bitcoin, Ethereum, and Litecoin via an online account like Coinbase or Binance.

Advanced-Data Analytics

Modern trading desks can tap into a wealth of data analytics and research to guide their investment decisions. Many providers of outsourced trading solutions can offer their services and make money for their clients, thanks to their privileged access to market insights plus industry analysis. Artificial intelligence also plays a role in this regard because traders can get a better picture of the nexus between fundamental analysis and technical charts.

Expanded After-Hours Trading

The forex market was the first to offer trading around the clock. The cryptocurrency markets never close. Equity securities and commodities markets are starting to follow suit with expanded hours of trading long after the closing bell rings on Wall Street. Market operators know that investors can now enter trades on their mobile devices, wherever they are, and at just about any time.

In the end, we can safely expect to see technology continue to dictate the future of global trading. These advances have great potential in terms of bringing investing closer to individuals around the world.

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