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.