Technology And Stock Market
The purpose of this research paper is to prove
that technology has been good for
the stock market. Thanks to technology,
there are now more traders than ever
because of the ease of trading online
with firms such as Auditrade and
Ameritrade. There are also more stocks
that are doing well because they are in
the technology field. The New York
Stock Exchange and NASDAQ have both
benefitted from the recent technological
movement. The NYSE says they "are
dedicated to maintaining the most efficient
and technologically advanced
marketplace in the world." The key to that
leadership has been the
state-of-the-art technology and systems development.
Technology serves to
support and enhance the human judgement at
point-of-sale. NASDAQ, the world’s
first fully electronic stock market,
started trading on February 8th, 1971.
Today, it is the fastest growing
stock market in the United States. It alo ranks
second among the world’s
securities in terms of dollar value. By constantly
evolving to meet the
changing needs of investors and public companies, NASDAQ
has achieved more
than almost any other market, in a shorter period of time.
Technology has
also helped investors buy stocks in other markets. Markets used
to open at
standard local times. This would cause an American trader to sleep
through
the majority of a Japanese trading day. With more online and
afterhours
trading, investors have more access to markets so that American
traders can
still trade Japanese stocks. This is also helped by an expansion
of most market
times. Afterhours trading is available from most online
trading firms. For
investing specialists, technology provides operational
capability for handling
more stocks and greatly increased volumes of trading.
Specialists can follow
additional sources of market information, and multiple
trading and post-trade
functions, all on "one screen" at work or at home.
They are also given
interfaces to "upstairs" risk-management systems. They
also have flexiblity
to rearrange their physical workspaces, terminals and
functional activities.
Floor brokers are helped with supports for an
industry-wide effort to compare
buy/sell contracts for accuracy shortly after
the trade. They are also given
flexibility in establishing working
relationships using the new wireless voice
headsets and hand-held data
terminals. The ability to provide new and enhanced
information services to
their trading desks and institutional customers is
provided. They have a
comprehensive order-management system, that systematizes
and tracks all
outstanding orders. Technology gives a market’s member
organizations
flexibility in determining how to staff their trading floor
operations as
well as flexiblity in using that market’s provided systems,
networks and
terminals or interfacing their own technology. They are given
assurance that
their market will have the systems capacity and trading floor
operations to
handle daily trading and in billions of shares. Member
organizations get
faster order handling and associated reports to their
customers, along with
speedier and enhanced market information. They also have a
regulatory
environment, which assures member organiztions that their customers,
large
and small, can trade with confidence. Technology also allows lower
costs,
despite increasing volumes and enhanced products. Companies listed on
the NYSE
are provided with an electronic link so they may analyze daily
trading in their
stock, and compare market performance during various time
periods. The
technology also supports the visibility of operations and
information, and
regulated auction-market procedures, which listed companies
expect from their"primary" market in support of their capital-raising activities
and their
shareholder services. Institutions get enhanced information flow
from the
trading floor, using new wireless technologies, as to pre-opening
situations,
depth of market, and indications of buy/sell interest by other
large traders.
Also supported are the fair, orderly, and deeply liquid
markets which
institutions require in order to allocate the funds they have
under management
whether placing orders in size for individual stocks (block
orders) or executing
programs (a series of up to 500 orders usually related
to an index). For
institutional investors, technology gives information on
timely trades and
quotes and makes them available through member firms,
market data services,
cable broadcasts and news media. They also are provided
with a very effective
way of handling "smaller" orders, giving them
communications priority and
full auction market participation for "price
improvement" yet turning the
average market order around in 22 seconds. Price
continuitity and narrow
quotation spreads, which are under constant market
surveillence and a regulatory
environment which enforces trading rules
designed to protect "small
investors" are also supported. There are many
different kinds of equipment
used on the stock market. One of these machines
is SuperDot, an electronic
order-routing system through which member firms of
the NYSE transmit market and
limit orders directly to the trading post where
the stock is traded. After the
order has been completed in the auction
market, a report of execution is
returned directly to the member-firm office
over the same electronic circuit
that brought the order to the trading floor.
SuperDot can currently process
about 2.5 billion shares per day. Another
piece of machinery is the Broker Booth
Support System. The BBSS is a
state-of-the-art order-management system that
enables firms to quickly and
efficiently process and manage their orders. BBSS
allows firms to selectively
route orders electronically to either the trading
post or the booths on the
trading floor. BBSS supports the following broker
functions: recieving
orders, entering orders, rerouting orders, issuing reports,
research, and
viewing other services via terminal "windows". The overhead"crowd" display is
America’s first commercial application of large-scale,
high-definition,
flat-screen plasma technology. It shows trades and quotes for
each stock. The
display also shows competing national market system quotes.
Clear,
legible information is displayed at wide viewing angles. Full color and
video
capabilities are also provided. The "Hospital Arm" Monitor is
suspended for
convenient viewing by specialists. Multiple data sources that are
displayed
include point-of-sale books, overhead "crowd" displays, market
montage and
various vendor services. The list of information sources is going to
continue
expanding. The Point-of-Sale Display Book is a tool that greatly
increases
the specialist’s volume handling and processing capabilities. Using
powerful
workstation technology, this database sysem maintains the limit order
book
for which the specialist has agency responsibility, assists in the
recording
and dissemination of trades and quotation changes, and facilitates
the
research of orders. All of this serves to eliminate paperwork and
processing
orders. The Consolidated Tape System is an integrated, worldwide
reporting
system of price and volume data for trades in listed securities in
all domestic
markets in which the securities are traded. The Hand-Held is a
mobile, hand-held
device that enables brokers to recieve orders, disseminate
reports, and send
market "looks" in both data and image format, from anywhere
on the trading
floor. Intermarket Trading System is a display that was
installed in 1978
linking all major U.S. exchanges. ITS allows NYSE and
NASDAQ specialists and
brokers to compare the price of a security traded on
multiple exchanges in order
to get the best price for the investor. These are
the machines that have helped
greatly increase the buying and selling of
stocks over the past few years. There
are great advantages to trading today
over the situation that past traders had.
The biggest beneficiaries of
this new technology are investors themselves. They
have all day to trade
instead of trading only during market hours, they have
more stocks to choose
from, and the markets are very high so people are making a
lot of money. In
conclusion, I have discovered that the research I have done on
this project
has revealed what I originally thought to be true. That is that the
stock
market has greatly benefitted from the recent advances in technologies.