Why robot traders haven’t replaced all the humans at the New York Stock Exchange—yet
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Electronic or scripless tradingsometimes called e-trading or paperless online brokerage nyse is a method of trading securities such as stocksand bondsforeign exchange or financial derivatives electronically. Information technology is used to bring together buyers and sellers through an electronic trading platform and network to online brokerage nyse virtual market places. Online brokerage nyse trading is in contrast to older floor trading and phone trading and has a number of advantages, but glitches and cancelled trades do still occur.
For many years stock exchanges were physical locations online brokerage nyse buyers and sellers met and negotiated. Exchange trading would typically happen on the floor of an exchange, where traders in brightly colored jackets to online brokerage nyse which firm they worked for would shout and gesticulate at one another — a process known as open outcry or pit trading the exchange floors were often pit-shaped — circular, sloping downwards to the centre, so that the traders could see one another.
With the improvement in communications technology in online brokerage nyse late 20th century, the need for a physical location became less important and traders started to transact from remote locations in what became known as electronic trading. Set up inNASDAQ was the world's first electronic stock market, though it originally operated as an electronic bulletin board [ citation needed ]rather than offering straight-through processing STP.
By investment firms on both the buy side and sell side were increasing their spending on technology for electronic trading. Traders also increasingly started to rely on online brokerage nyse to analyze market conditions and then execute their orders automatically.
The move to electronic trading compared to floor trading continued to increase with many of the major exchanges around the online brokerage nyse moving from floor trading to completely electronic trading. While the majority of retail trading in the United States happens over the Internet, retail trading volumes are dwarfed by institutional, inter-dealer and exchange trading.
However, in developing economies, especially in Asia, retail trading constitutes a significant portion of overall trading volume . For instruments which are not exchange-traded e. US treasury bondsthe inter-dealer market substitutes for the exchange. This is where dealers trade directly with one another or through inter-dealer brokers i. They acted as middle-men between dealers such as investment banks.
This type of trading traditionally took place over the phone but brokers moved to offering electronic trading services instead. Similarly, B2C trading traditionally happened over the phone and, while some still does, more brokers are allowing their clients to place orders using online brokerage nyse systems.
Many retail or "discount" brokers e. Charles SchwabE-Trade went online during the late s and most retail stock-broking probably takes place over the web now. Larger institutional clients, however, will generally place electronic orders via proprietary electronic trading platforms such as Bloomberg TerminalReuters XtraThomson Reuters EikonBondsPro, Thomson TradeWeb or CanDeal which connect institutional clients to several dealersor using their brokers' proprietary software.
For stock trading, the online brokerage nyse of connecting counterparties through electronic trading is supported by the Online brokerage nyse Information eXchange FIX Protocol. Used by the vast online brokerage nyse of exchanges and traders, the FIX Online brokerage nyse is the industry standard for pre-trade messaging and trade execution.
While the FIX Protocol was developed for trading stocks, it has been further developed to accommodate commodities,  foreign exchange,  derivatives,  and fixed income  trading. For retail investors, financial online brokerage nyse on the web offer great benefits. The primary benefit is the reduced online brokerage nyse of transactions for all concerned as well as the ease and the convenience.
Web -driven financial transactions bypass traditional hurdles such as logistics. Exchanges typically develop their own systems sometimes referred to as matching enginesalthough sometimes an exchange will use another exchange's technology e. Exchanges and ECNs generally offer two methods of accessing their systems online brokerage nyse.
From an infrastructure point of view, most exchanges will provide "gateways" which sit on online brokerage nyse company's network, acting in a manner similar to a proxyconnecting back to the exchange's central system. Many brokers develop their own systems, although there are some third-party online brokerage nyse providers specializing in this area.
Some banks will develop their own electronic trading systems in-house, but this can be costly, especially when they need to connect to many exchanges, ECNs and brokers. There are a number of companies offering solutions in this area. Many types of algorithmic or automated trading activities can be described as high-frequency trading HFTwhich is a specialized form of algorithmic trading characterized by high turnover and high order-to-trade ratios.
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