How Computers Took Over Trading

http://www.bloomberg.com/news/2013-08-22/how-computers-took-over-trading.html

by jonbaer • 13 years ago

40 13 13 years ago

yuliyp2• 13 years ago

What exactly do computerized record processing systems have to do with algorithmic trading, besides that both use computers to do the actual processing necessary?

seferphier• 13 years ago

exactly. I was hoping for more content, but it ended without connecting between algo trading and computerized record

ddeck• 13 years ago

Well automation of the trade processing element is what has allowed for algorithmic trading to be possible at anything above a glacial frequency.

But I'm not sure what your question is in response to. Was there a suggestion of a link? I didn't see algorithmic trading mentioned, simply a description of the automation of trade processing that has occurred over the years (vs automation of the trade decision making process).

yuliyp2• 13 years ago

The article led with talk of algorithmic trading, then ended up actually talking about computerized trade processing. These have nothing to do with each other, but were just juxtaposed for clicks.

nohuck13• 13 years ago

I had the same thought. The article is more about the history of securities clearing.

I worked for a couple of years on clearing tech and have worked in trading tech. The two sides are didn't share much in the way of systems but clearing tech came first and enabled e.g. direct exchange data feeds. Clearing is the quintessential PG "schlep" problem, relatively easy math, an administrative hassle to set up accounts and connectivity. Dominated by a few big players and "enterprise" software vendors that no one is really happy with.

Some of the systems from the 1970's are still in production. Our technology counterpart from one of the main US CCP's [1] (and a really nice guy) told us he was running a mainframe emulator on his Windows box to service requests in 2010. Wish I could remember what the mainframe was.

[1] http://en.wikipedia.org/wiki/Central_Counterparty_Clearing

Edit: fixed mispaste, link, clarified

njharman• 13 years ago

I don't even think today's issue was Algol or high frequency related. And electronic exchanges (more than record processing) are what's made HF and many formd of Algol trading possible.

suyash• 13 years ago

Another misleading title - cheap seo tricks.

cabacon• 13 years ago

I don't know, even the non-HFT side of computers in trading is interesting. I looked at http://raudys.com/kursas/2002%20Trading%20and%20exchanges.pd... the other day, which is a set of chapter-excerpts from "Trading and Exchanges". It was a great read in a "Here's how the sausage is made" kind of way. It offered a very pragmatic overview of how and why things are the way they are; it certainly enticed me into getting the full book.

seewhat• 13 years ago

A piece of trivia: "Bernard L. Madoff Investment Securities" is listed as a well-known example of a sell-side dealer (the publishing date is 2002). Understandably, some other firms no longer operate under their listed names.

joosters• 13 years ago

It was interesting to read a little about how trades were settled prior to electronic records. Everyone seems to assume things worked fantastically before our stock exchanges were computerised, yet the errors and screw-ups were still there.

mikestew• 13 years ago

And yet it still takes three days to settle a trade (and practically, to put money in my pocket). There may be some rule that dictates this, but it's not like we are sending couriers over with stock certificates anymore.

mathattack• 13 years ago

There are lots of stories of brokerage firms buckling under the paperwork. Outsiders like Ross Perot and Warren Buffett were brought in to help manage some of the messes. One of the problems of the MBS/Foreclosure crisis is tracking down all the physical paperwork.

smoorman1024• 13 years ago

The title from Bloomberg is misleading and the others here are correct to say that this is more a history of Electronic Clearing. That said, Electronic Clearing does allows for increased automated interaction with the exchange spinning off everything we think of today as Electronic Trading(think HFT algo-prop trading, dark pools, reg NMS, etc.).

Bloomberg could have also arbitrarily picked ticker tape as an example of how computers (or just technology for that matter) took over Trading. Its a natural progression in a highly competitive industry where speed of information is an essential edge.

It would be more poignant to analyze how Reg NMS came to be and what effect that has on the market.

Also consider the financial incentive that the exchanges are in as electronic trading has become prevalent. More trades me more commissions. The exchanges WANT higher volumes and more churn. Take what the exchange operators say with a grain of salt.

How Computers Took Over Trading

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