Finance

Technology’s increasing importance in finance

From the advent of the first shares to the spread of modern trading interfaces, investment technology advances had the sole purpose of making the capital allocation process to create additional value for companies and shareholders as efficiently as possible.

Technologies have fundamentally changed investment and trading culture. Despite the fact that today in the headlines are dominated by cryptocurrencies, high-frequency trading and artificial intelligence, these achievements are only a small part of what has shaped the modern investment landscape.

Trading platforms

Trading platforms have been developing rapidly since their introduction in the 1960s. The pioneers were specialized trading machines created by Ultronics and Scantlin Electronics. With their help, the analyst could use special keys to request stock quotes, making it easier to access the information.

Today, modern terminals from Bloomberg and Reuters are built on the basis of software. It can be downloaded to any computer, giving investors a secure network to quickly access real-time data. They help to get information about prices and market news, make trades and even communicate with customers and competitors.

Another important breakthrough was creating MetaTrader platforms in the Forex industry. These platforms help both new and experienced traders to simplify the process of trading. They are equipped with different tools, including indicators, robots, technical analysis. Furthermore, currency strength meter MT4 offers shows the strength of a particular currency, which is especially important when it comes to trading.

Automatic stop trades

An emergency interruption of trading using computer algorithms seems like a fairly simple technological option. But its introduction after the market collapse on October 19, 1987 – then the DJIA index fell by 22.6% in one day – allowed it to significantly improve the stability of financial markets. And as a result – the safety of millions of traders.

If prices become overly volatile, a system designed to control panic sales temporarily stops trading securities on the stock exchange. The day when DJIA has rapidly lost nearly a quarter of its value has gone down in history as “Black Monday”, and “trade interruption machines” are now reacting to any decline in the index by 7% or more. If this happens, trading on all U.S. exchanges automatically stops for 15 minutes, and a 20% drop stops trading for the rest of the day.

This time allows brokers and other market participants to consult with clients and make decisions based not only on emotions. And for large investors, the mechanisms of automatic stop trading – another factor, forcing them to correctly assess the amount of capital that they pour into the market overnight.

Electronic Exchanges

The rapid development of the U.S. economy after the Civil War of 1861 marked the beginning of a large-scale industrial revolution around the world. In 1868, Chicago had its first commodity exchange, and for more than a hundred years trading was associated with a rapid pace of buying and selling, crowded and noisy rooms in which there was real chaos.

Online trading

E-trading has reduced the need for traders, and online trading has fundamentally changed the role of the broker. Whereas earlier it was necessary to call a consultant to place an application, with the spread of online trading platforms by the end of the 1980s, investors had direct access to stock prices and transactions with them.

Currently, brokers are only intermediaries between individuals and the exchange, and the cost of their services is usually determined by the percentage of the transaction volume. The advent of public information in the Internet space has made trading accessible to everyone.

Smartphones

The advent of the first cell phones in the 1970s dramatically increased the rate of information dissemination and transactions. From Gordon Gekko’s first brick phones to the advent of modern smartphones with impressive computing power, decades have passed. And now the smartphone has completely changed the rules of the game, freeing investment managers from the need for a physical presence in the office.

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