Technology In The Stock Exchanges

The Evolution of Financial Trading: From Paper to Pixels

Trading of financial instruments at first started to be very straightforward. It goes from one creditor to one debtor.

The Rise of Debt Trading: A Historical Overview

In the 1100s, agricultural debts in France have started to be bought and sold by merchants, giving rise to a market dealing not with fruits and vegetables, but with paper representing loans to farmers.

Venetian Ventures: Early Government Debt Trading

In the 1300s, merchants particularly from Venice, started to trade government debt between merchants and the Venetian councils. Other City-states followed suit, with Pisa and Genoa following and even started buying and selling government bonds of one city-state to another city-state.

The Birth of Stock Exchanges: A Solution to Complexity

This complex web of paper is profitable but is certainly inconvenient. The innovation of the Stock Exchanges was primarily what products or services can be made. In a sense, the technology of the stock exchanges was completely tied to the technology of academics, which is the manual time-consuming pen and paper. Only when the printing press was invented when the stock exchanges start to print certificates. However, certificates, while easily and not too time-consuming to make, can still be inconvenient when you have to carry them around to be exchanged. This need for physical delivery of the said certificate has proven to be too cumbersome that some merchants have to think of ways to make it better. It was when the Dutch in a way invented the modern stock exchange where one specialized “bourse” makes a certificate of the debt or equity certificate, making the trading of certificates easier to do.

Embracing Modern Technology

The Telephone: Bridging Distance

The development of the telephone has enhanced the convenience of trading by leaps and bounds; distance is no longer an issue as all you need to do is to contact a broker who will take control of locating buyers or sellers of the particular securities. This has facilitated trading, previously, it takes days and even weeks to settle the security. Now one may anticipate security to be given within a few days. This is where the T+3 delivery comes from; it takes the trading day plus 3 days for a security to be delivered.

The Internet: A Game-Changer

Another technological disruptor is the internet; prior financial organizations like banks and hedge funds had to be careful only of themselves and the government. Now, people may enter the stock market and can produce tiny boom and bust cycles. The internet became the great equalizer.

Robotic Revolution: Automated Trading

Nowadays, there is another shift; some financial decisions are now being made by robots and programs that can find opportunities in a split second. The shake-up given by technology in the financial world is big, and opportunities can still be found.