Infracore LLC Blog

In the Midst of Chaotic Financial Markets, Technology Remains a Constant

In the Midst of Chaotic Financial Markets, Technology Remains a Constant

Not that long ago, the trading floor of the New York Stock Exchange was filled with business-tie clad gladiators, climbing over each other in what looked like a capitalism-induced mosh pit. The Open outcry pit had its language, its own weather, its own smell. Nowadays, these pits are more subdued. They still are populated with people, and some are gesturing to buy and sell, but most of the transactions are done digitally. It is this role where the computer has changed the way financial markets work; from the ground up.

The Street Before the Internet
The first thing you should know is that computation of some sort has been utilized by traders and brokers for decades. With that truth out of the way, today’s Wall Street doesn’t resemble the Wall Street of old at all. Long gone are the days where traders would make trades out the window, stand in the street during a snowstorm to buy and sell securities, and even later, sit in their offices and read stock prices off a ticker tape, or later, a teleregister (or quotation board).

These technologies all supercede the technologies of today, and go a long way toward paving the way for the instantaneous trading you see in hedge funds and brokerage houses today. In fact, once the personal ticker was invented during the second half of the twentieth century, and traders could get nearly instantaneous updates at their home or office, the stage was set for dynamic investor growth. In the 1980s the Quotron used more modern computing tactics to produce the same effect: providing individuals with up-to-the-minute trading information. These technologies, while all cutting-edge for their times, don’t have the enormous effect that today’s technologies have for investors.

The Street and the Internet
In order to monetize, commercialize, and totally legitimize the new Internet, there first needed to be capital in place to build the necessary infrastructure required in order to process and send all the data that people send via the Internet. Many people take this infrastructure for granted today, but there was a time, in the infancy of the Internet where Wall Street was trying to get a hold on all of the available new technologies. After all, brokerages had been using something called Electronic Communications Networks (ECNs) to create efficiencies for brokerages since the early 1970s. Like most of western society, brokers were wholly unprepared for the speed in which these new networking technologies would change the market.

The big shift began in 1994 when two economists, William Christie and Paul Schultz, published a paper titled, “Why do NASDAQ Market Makers Avoid Odd-Eighth Quotes?” where they outlined a deliberate anomaly where these market makers were manipulating the spread (the difference between the buy and sell prices of NASDAQ securities) to secure these individuals a higher profit margin. This led to a full scale investigation and, eventually, rule changes by the Security and Exchange Commission (SEC) to protect smaller investors. The demand fueled by more attractive (and fair) investment tools led to online brokerages such as ETrade and Ameritrade being created. These organizations offered flexibility to any individual investor and led to traditional brokerages, such as Charles Schwab and TD Waterhouse, moving much of their trading to the web.

A few years later with more and more retail outlets popping up, Wall Street seemed to be in a spending frenzy over the next big Internet sensation. This led to what is known as the dot com bubble. Its explosion 1999 and 2000 paved the way for recession in many major western nations. As the economies in the EU and US rebounded, the improvement was largely driven by consumer and investor confidence that the Internet was here to stay, and that companies that had a viable business plan could find success by using the Internet as their sales base.

The Street at High Speed
After the housing market collapsed in 2008, the global economy hit the skids quickly. As a result, many of the strategies that were implemented to keep the world from sinking into a terrible depression were to add stimulus capital, without any real regulations about where the money was going to go. This has produced a wilder, less transparent, and overall fast stock market. With the use of today’s most dynamic Internet speeds, traders are now able to execute trades in incredibly short intervals; millions of times faster than the human mind can make a decision. Quantitative trading uses complex algorithms to do trades so fast that a half a cent here and a half a cent there can lead to millions of dollars changing hands over millions of trades.

This technology-driven trend is difficult for Wall Street regulators. Despite having state of the art solutions for monitoring these transactions, so many are made each day that it is practically impossible for people to keep their finger on the pulse of the market any longer. Regulators now rely heavily on automated systems that look for fraudulent activity in what seems to be a futile effort to keep investors, traders, brokers, and anyone else involved in this system, honest.

Nowadays, any major volatility of the market is largely the result of these micro-traders. Take the “Flash Crash” of May 6, 2010. The DOW, which had been losing ground all morning suddenly dropped 600 points, with Procter & Gamble losing 25 percent off its starting stock price. There was true frenzy on Wall Street, with the fear that we were looking into the abyss prevalent throughout the pundits and money managers all throughout the financial industry. In a matter of moments almost $1 trillion in shareholder value was erased.

The silver lining is that the market rebounded almost as fast as it fell and the DOW only finished down three points, but it took regulators over four months to determine what made the “Flash Crash” happen. It turned out that the problem stemmed from one of these algorithms being triggered by a very large sale of stock, along with the same-day announcement that Greece was bankrupt. When millions of trades can be made every minute, and are made every minute, there just isn’t the infrastructure there to provide entities the proper oversight the markets need to be thought of as “controlled”.

What do you think about the role of technology in the stock market? Do we need better oversight to ensure that fortunes are not lost in a blink of an eye, or that automation can’t take down the world economy? Or, do you believe that the market itself will dictate the end-game for technology in the financial sector?

To relate all of this back to your business, how has technology changed you? Has it made you faster, more automated, and more effective?

Leave your thoughts below in the comments.

Tip of the Week: 5 Tips From the 90s That You’ve C...
Tip of the Week: Try This Weird Trick to Free Up S...
 

Comments 1

Kevyn Hawkins on Friday, 15 March 2019 11:58

For the finance market we have to read this blog really and very carefully for the chapter of the parts while catching this one. When terms will not be about the subdued of the capitalism about https://aussiessayservices.com/australianwritings-com-review/ website then how be controlling of the financial security boundaries.

For the finance market we have to read this blog really and very carefully for the chapter of the parts while catching this one. When terms will not be about the subdued of the capitalism about https://aussiessayservices.com/australianwritings-com-review/ website then how be controlling of the financial security boundaries.
Already Registered? Login Here
Guest
Friday, March 22 2019

Captcha Image

Tag Cloud

Tip of the Week Security Technology Best Practices Privacy Cloud Business computing Google Hosted Solutions Network Security Malware Productivity Software Microsoft User Tips Data Hackers Innovation Internet Mobile Devices Smartphones Backup Tech Term Business Hardware Email Workplace Tips Efficiency Windows 10 VoIP Data Backup Communications Browser Business Continuity Smartphone Android IT Services Business Management Computer Cloud Computing Outsourced IT Managed IT Services Data Recovery Alert Disaster Recovery Small Business Ransomware Computers Chrome Communication Miscellaneous Managed IT Services Artificial Intelligence Router Windows 10 Office Internet of Things Cybercrime Law Enforcement Windows IT Support Cybersecurity Network Passwords Health How To Office 365 Social Media Gadgets Password Applications Telephone Systems Facebook Virtualization Holiday Mobile Device Collaboration Quick Tips Server Productivity Money Wi-Fi Private Cloud Information Social Engineering Word Google Drive Automation Saving Money Work/Life Balance Upgrade Spam App Microsoft Office Connectivity Hacking Mobile Device Management Bring Your Own Device Paperless Office Save Money Mobility BDR Phishing Managed Service Operating System Data Security Keyboard Data Protection Apps Voice over Internet Protocol HaaS Scam Data Breach Office Tips Vulnerability Two-factor Authentication Settings IT Support Encryption PDF Data Storage Augmented Reality Meetings Electronic Medical Records Flexibility Samsung OneNote VPN Bandwidth Cryptocurrency Training Legal Managed Service Provider Servers IT Management Entertainment Redundancy Human Resources Government Avoiding Downtime Fraud Access Control Spam Blocking Google Docs Automobile USB Value Firewall Networking IT Plan Comparison Public Cloud Machine Learning Save Time Employer-Employee Relationship Website CES Data Management Virtual Assistant Charger Patch Management Unsupported Software Remote Monitoring Marketing Content Management End of Support Sports Managed IT Telephone System Cleaning Telephony Business Intelligence Battery Worker History Big Data Software as a Service Windows 7 Blockchain Botnet Identity Theft Update Computer Care Remote Computing BYOD Infrastructure Books Assessment iPhone Shortcuts Evernote Black Market Employer Employee Relationship Solid State Drive Flash Multi-Factor Security HIPAA Advertising Document Management Microchip Travel Credit Cards Inventory IT Consultant Net Neutrality Frequently Asked Questions WiFi Criminal Wearable Technology Start Menu Workforce Scalability Benefits Smartwatch Password Manager Computing Infrastructure Relocation User Error Television Social Wireless Charging Devices Computer Accessories Remote Worker Audit Trending Search Engine Wireless Leadership Monitor ISP Excel Wireless Internet Warranty Tools Accountants Safe Mode Employee IT solutions Physical Security Business Mangement Vendor Management Staff Best Practice Emergency Public Computer HVAC Vendor Cortana Thought Leadership Bluetooth Wiring Computer Fan Sync Loyalty Bing Data loss Amazon Authentication Cryptomining Tip of the week Troubleshooting Humor Internet Exlporer Wire Printer Downtime Telecommuting Information Technology Smart Technology Current Events Digital Signage Gmail Techology Users Specifications Content Enterprise Content Management Display webinar Google Apps Files Unified Threat Management The Internet of Things SaaS Hybrid Cloud YouTube Help Desk Screen Mirroring Amazon Web Services Nanotechnology Search Data storage MSP Database Windows 10s Windows Server 2008 Mouse Root Cause Analysis Remote Work Practices Instant Messaging Two Factor Authentication Knowledge Google Search HBO Recovery Recycling Virtual Reality Experience Digital Signature Video Games Audiobook Password Management Security Cameras Conferencing Software Tips Workers Addiction Risk Management Mobile Computing FENG Apple Cast Online Shopping Smart Tech How to Hiring/Firing File Sharing Business Technology Internet exploMicrosoft Smart Office Administrator Hosted Computing Network Congestion Proactive IT Outlook eWaste Worker Commute Music Skype Millennials Transportation Safety NIST Hacker Emails Cache Education Politics Rootkit Camera Managing Stress Biometric Security Regulation Printers Congratulations Webinar CrashOverride Twitter Company Culture Compliance Thank You

Recent Comments

Thaddeus Greer Can Chargers Be Interchanged Between Devices?
21 March 2019
The infracore is known as the heart of the information technology all over the world and the issue d...
AngusCousens What is Encryption, Anyways?
19 March 2019
When we hold the computer the basic and stylish accessories with the desktop is the requirement of e...
Kevyn Hawkins In the Midst of Chaotic Financial Markets, Technology Remains a Constant
15 March 2019
For the finance market we have to read this blog really and very carefully for the chapter of the pa...
Micheal williams Tip of the Week: Improve Email Open Rates With an Attention-Grabbing Title
15 March 2019
In this modern world, technology has changed the world and even it has created many chances to creat...
Maddison Franklin Tip of the Week: Improve Email Open Rates With an Attention-Grabbing Title
14 March 2019
IT is the heart of technology all over the world and there are many ease by the use of this technolo...