Online trading mechanism wikipedia
Electronic or scripless tradingsometimes called e-trading or paperless trading 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 create virtual market places. Electronic online trading mechanism wikipedia is in contrast to older floor online trading mechanism wikipedia 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 where buyers and sellers met and negotiated. Exchange trading would typically happen on the floor of an exchange, where traders in brightly colored jackets to identify 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 the 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 algorithms to online trading mechanism wikipedia market conditions and then execute their orders automatically. The move to electronic trading compared online trading mechanism wikipedia floor trading continued to increase with many of the major exchanges around the world 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 online trading mechanism wikipedia 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 online trading mechanism wikipedia 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 electronic systems.
Many retail online trading mechanism wikipedia "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 process of connecting counterparties through electronic trading is supported by the Financial Information eXchange FIX Protocol.
Used by the vast majority of exchanges and traders, the FIX Protocol 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 services on the web offer great benefits. The primary benefit is the reduced cost 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 —. From an infrastructure point of view, most trade currencies options and philadelphia exchange will provide "gateways" which sit on a 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 solutions providers specializing in this area. Some banks will develop online trading mechanism wikipedia 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 online trading mechanism wikipedia 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. From Wikipedia, the free encyclopedia. Not to be confused with E-Trade. This article needs additional citations for verification. Please help improve this article by adding citations to reliable sources.
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A brokerage firmor simply brokerageis online trading mechanism wikipedia financial institution that facilitates the buying and selling of financial securities between a buyer and a seller. Brokerage firms serve a clientele online trading mechanism wikipedia investors who trade public stocks and other securities, usually through the firm's agent stockbrokers.
The staff of this type of brokerage firm is entrusted with the responsibility of researching the markets to provide appropriate recommendations, and in doing so they direct the actions of pension fund managers and portfolio managers alike. These firms also offer margin loans for certain approved clients to purchase investments on creditsubject online trading mechanism wikipedia agreed terms and conditions.
Traditional brokerage firms have also become a source of up-to-date live stock prices and quotes. A discount broker or an online broker is a firm that charges a relatively small commission by having its clients perform trades via automated, computerized trading platforms rather than by having an actual stockbroker assist with the trade.
Most traditional brokerage firms offer discount options and compete heavily for client volume due to a shift towards this method of trading. Other ways to lower costs for these brokers is by executing orders only a few times a day by aggregating orders from a large number of small investors into one or more block trades which are made at certain specific times during the day.
They help lower costs in two ways:. Since investor money is pooled before stocks are bought or sold, it enables investors to contribute small amounts of cash with which fractional online trading mechanism wikipedia of specific stocks can be purchased. This is usually not possible with a regular stockbroker. Many broker-dealers also serve primarily as distributors for mutual fund shares. These broker-dealers may be compensated in numerous ways and, like all broker-dealers in the United States, are subject to compliance with requirements of the US Securities and Exchange Commission and one or more self-regulatory organizationssuch as the Financial Industry Regulatory Authority FINRA.
The forms of compensation may be sales loads from investors, or Rule 12b-1 fees or servicing fees paid by the mutual funds. From Wikipedia, the free encyclopedia.
Comparison of online brokerages in the United Online trading mechanism wikipedia. Retrieved 10 October British Columbia Securities Commission. Thomas Online trading mechanism wikipedia 6 March Regulation of Investment Companies.