Business: Stock Market and Electronic Communication Network Essay

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Innovations have been made in trading. This paper will tell the story of electronic trading and some innovations that have occurred throughout electronic trading. In past years NASDAQ trading was always done face-to face. Exchanges around the world such as London, Tokyo, and Frankfurt were some of the first exchanges that moved into trading electronically. Global electronic order routing, broad dissemination of quote and trading information, and some new types of trading systems are possible because of innovations in computing and communications. These new innovations make electronic trading possible and to get rid of face-to-face trading. Innovations have made it possible for new competitors to enter and also makes cost of new trading systems to lower, which in turn makes the cost of every thing lower a bit. Electronic trading has become more popular internationally and some stocks are only dealing with electronic trading. There are rules that regulate trade execution mechanism also regulating the prices and quotes of data that is released. There are a lot of different and diverse market structures. A couple of these structures are a continuous limit order book, a single-price auction and a trading system with passive pricing. With the electronic limit order book, people keep posting bids and offers for other people to see. These books do not always have the person’s personal information posted on it. It does not post the time that it would still be good. People will start a trade with an order that has been there on the order book or could be place a brand new one. If a bid or offer is present and a person makes a price and it is the same price or a higher price the trade happens. The Securities and Exchange Commission takes and controls the biggest electronic trading system which is the “Electronic Communications Network as electronic trading systems that will automatically match buy and sell orders at certain prices.” The Securities and Exchange Commission says that Electronic Communications Network’s are integral to the modern securities markets. The most used Electronic Communications Network is almost like the electronic limit order book. There are a couple of Electronic Communications Network’s that the NASDAQ system looks at and they are: Atttain, Archipelago, Brass Utility, Bloomberg Tradebook, Instinet, Nextrade, and Track. The lower trading cost have been because of the matching systems and automated communication by the Electronic Communications Network. Electronic Communications Network stops using humans as dealers and matches buyers and sellers; this will make profits smaller electronic communication network technology is cutting edge allows faster trading compared to market centers trading system. The median time for an electronic communication network would be two or three seconds, compared to order through an exchange which is 20 seconds or more. The electronic communication network will show much better price information than the traditional market does. With the information the electronic communication network will let people look at the market conditions and also optimize some trading strategies. So that the electronic communication network can show anonymity the electronic communication network puts up the price and the size of the order. Staying anonymous is very important to the people because enemies could try and steal their strategies. Another reason for the anonymity is the enemies will try and trade before the first people can make their trades. This is defined as front running. Front running is a big problem and the Securities and Exchange Commission looks at front running bad. Electronic communication network finds a match the trade will automatically happen. Intinet and Island, some of the biggest electronic communication networks, will match over 70 percent of their order volume on the inside. Then if a match cannot be found on the inside the electronic communication network will offer
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