Contact us today!
866-348-2602

Total Tech Care Blog

Total Tech Care has been serving Florida since 2001, providing IT Support such as technical helpdesk support, computer support, and consulting to small and medium-sized businesses.

In the Midst of Chaotic Financial Markets, Technology Remains a Constant

b2ap3_thumbnail_history_of_it_in_finance_400.jpgNot that long ago, the trading floor of the New York Stock Exchange was filled with business-tie clad gladiators, climbing over each other in what looked like a capitalism-induced mosh pit. The Open Outcry pit had its language, its own weather, its own smell. Nowadays, these pits are more subdued. They still are populated with people, and some are gesturing to buy and sell, but most of the transactions are done digitally. It is this role where the computer has changed the way financial markets work; from the ground up.

The Street Before the Internet
The first thing you should know is that computation of some sort has been utilized by traders and brokers for decades. With that truth out of the way, today’s Wall Street doesn’t resemble the Wall Street of old at all. Long gone are the days where traders would make trades out the window, stand in the street during a snowstorm to buy and sell securities, and even later, sit in their offices and read stock prices off a ticker tape, or later, a teleregister (or quotation board).

These technologies all superseded the technologies of today, and go a long way toward paving the way for the instantaneous trading you see in hedge funds and brokerage houses today. In fact, once the personal ticker was invented during the second half of the twentieth century, and traders could get nearly instantaneous updates at their home or office, the stage was set for dynamic investor growth. In the 1980s, the Quotron used more modern computing tactics to produce the same effect: providing individuals with up-to-the-minute trading information. These technologies, while all cutting-edge for their times, don’t have the enormous effect that today’s technologies have for investors.

The Street and the Internet
In order to monetize, commercialize, and totally legitimize the new Internet, there first needed to be capital in place to build the necessary infrastructure required in order to process and send all the data that people send via the Internet. Many people take this infrastructure for granted today, but there was a time, in the infancy of the Internet where Wall Street was trying to get a hold on all of the available new technologies. After all, brokerages had been using something called Electronic Communications Networks (ECNs) to create efficiencies for brokerages since the early 1970s. Like most of western society, brokers were wholly unprepared for the speed in which these new networking technologies would change the market.

The big shift began in 1994 when two economists, William Christie and Paul Schultz, published a paper titled, “Why do NASDAQ Market Makers Avoid Odd-Eighth Quotes?” where they outlined a deliberate anomaly where these market makers were manipulating the spread (the difference between the buy and sell prices of NASDAQ securities) to secure these individuals a higher profit margin. This led to a full-scale investigation and, eventually, rule changes by the Security and Exchange Commission (SEC) to protect smaller investors. The demand fueled by more attractive (and fair) investment tools led to online brokerages such as ETrade and Ameritrade being created. These organizations offered flexibility to any individual investor and led to traditional brokerages, such as Charles Schwab and TD Waterhouse, moving much of their trading to the web.

A few years later with more and more retail outlets popping up, Wall Street seemed to be in a spending frenzy over the next big Internet sensation. This led to what is known as the dot com bubble. Its explosion 1999 and 2000 paved the way for recession in many major western nations. As the economies in the EU and US rebounded, the improvement was largely driven by consumer and investor confidence that the Internet was here to stay, and that companies that had a viable business plan could find success by using the Internet as their sales base.

The Street at High Speed
After the housing market collapsed in 2008, the global economy hit the skids quickly. As a result, many of the strategies that were implemented to keep the world from sinking into a terrible depression were to add stimulus capital, without any real regulations about where the money was going to go. This has produced a wilder, less transparent, and overall fast stock market. With the use of today’s most dynamic Internet speeds, traders are now able to execute trades in incredibly short intervals; millions of times faster than the human mind can make a decision. Quantitative trading uses complex algorithms to do trades so fast that a half a cent here and a half a cent there can lead to millions of dollars changing hands over millions of trades.

This technology-driven trend is difficult for Wall Street regulators. Despite having state of the art solutions for monitoring these transactions, so many are made each day that it is practically impossible for people to keep their finger on the pulse of the market any longer. Regulators now rely heavily on automated systems that look for fraudulent activity in what seems to be a futile effort to keep investors, traders, brokers, and anyone else involved in this system, honest.

Nowadays, any major volatility of the market is largely the result of these micro-traders. Take the “Flash Crash” of May 6, 2010. The DOW, which had been losing ground all morning suddenly dropped 600 points, with Procter & Gamble losing 25 percent off its starting stock price. There was true frenzy on Wall Street, with the fear that we were looking into the abyss prevalent throughout the pundits and money managers all throughout the financial industry. In a matter of moments, almost $1 trillion in shareholder value was erased.

The silver lining is that the market rebounded almost as fast as it fell and the DOW only finished down three points, but it took regulators over four months to determine what made the “Flash Crash” happen. It turned out that the problem stemmed from one of these algorithms being triggered by a very large sale of stock, along with the same-day announcement that Greece was bankrupt. When millions of trades can be made every minute, and are made every minute, there just isn’t the infrastructure there to provide entities the proper oversight the markets need to be thought of as “controlled”.

What do you think about the role of technology in the stock market? Do we need better oversight to ensure that fortunes are not lost in a blink of an eye, or that automation can’t take down the world economy? Or, do you believe that the market itself will dictate the end-game for technology in the financial sector?

To relate all of this back to your business, how has technology changed you? Has it made you faster, more automated, and more effective?

Leave your thoughts below in the comments.

 

Comments

No comments made yet. Be the first to submit a comment
Already Registered? Login Here
Guest
Wednesday, 02 April 2025
If you'd like to register, please fill in the username, password and name fields.

Blog Archive

Sign Up for Our Newsletter

  • First Name *
  • Last Name *

      Free Consultation

      Sign up today for a
      FREE Network Consultation

      How secure is your IT infrastructure?
      Let us evaluate it for free!

      Sign up Now!

      Free Consultation
       

      Tag Cloud

      Security Tip of the Week Technology Best Practices Business Computing Cloud Privacy Hackers Productivity Hosted Solutions Efficiency Software Network Security Business Google Microsoft Internet Email Malware Workplace Tips Backup Innovation Data User Tips Computer Mobile Devices IT Services Hardware Android VoIP Disaster Recovery communications IT Support Smartphones Communication Business Continuity Miscellaneous Smartphone Mobile Device Browser Small Business Network Productivity Collaboration Quick Tips Cybersecurity Users Business Management Upgrade Windows Phishing Managed IT Services Outsourced IT Data Backup Ransomware Windows 10 Data Recovery Server Save Money Cloud Computing Office Passwords Windows 10 Gadgets Chrome Tech Term Virtualization Saving Money Holiday Social Media Managed IT Services Managed Service Microsoft Office Automation Cybercrime Operating System Artificial Intelligence Computers Facebook IT Support Internet of Things Health Hacking Wi-Fi BYOD Mobile Device Management Networking Covid-19 Managed Service Provider Information Alert Spam Office 365 Telephone Systems Remote Information Technology Recovery BDR Employer-Employee Relationship Social Engineering Mobility Router Bandwidth Law Enforcement Human Resources Big Data Remote Monitoring Password Money Mobile Computing Encryption App History Data Breach Applications Application Blockchain Paperless Office Private Cloud How To Remote Computing Managed IT Mobile Office Data Storage Apps Patch Management Office Tips Training VPN Government Data Security Two-factor Authentication Mouse HaaS Bring Your Own Device Data Management Infrastructure Work/Life Balance Voice over Internet Protocol Flexibility Vulnerability Marketing WiFi Windows 7 Word IT solutions Entertainment Website Wireless Google Drive Budget Servers Gmail Avoiding Downtime Settings Firewall Telephone System Staff Software as a Service Machine Learning Virtual Reality Employee/Employer Relationship Apple Save Time Remote Work RMM Connectivity Social User Error Cleaning Meetings Conferencing End of Support Scam Physical Security Education Risk Management Hacker Data Protection Safety HIPAA USB Sports The Internet of Things Vendor Management Redundancy Lithium-ion battery Keyboard Vendor Managed Services Display Virtual Assistant Current Events Processor Telephony Fax Server Authentication Samsung Document Management Hard Drive SaaS Solid State Drive Wireless Technology Value How to Downtime Update Electronic Medical Records Spam Blocking Computing Network Congestion Data storage eWaste Google Docs Automobile Hiring/Firing Identity Theft Virus Computing Infrastructure Going Green Unified Threat Management Computer Accessories Digital Signage Wearable Technology Augmented Reality Fraud Retail Hard Drives Business Intelligence Instant Messaging Battery Remote Worker Robot Shadow IT Excel Worker Procurement Legal Audit IT Management Cryptocurrency Printer Biometrics Workplace Strategy Net Neutrality Bluetooth Virtual Desktop Internet Exlporer Help Desk Botnet IT Plan Printing DDoS PDF Comparison SharePoint Unsupported Software CES Managed Services Provider IT Consultant Proactive IT Charger Business Technology Best Practice Content Management Database Humor Customer Service YouTube Access Control Compliance Environment Computer Care Remote Workers Black Market OneNote Antivirus Email Best Practices IT Assessment Business Owner Manufacturing Virtual Private Network NarrowBand Netflix Windows 8 Two Factor Authentication Workforce Root Cause Analysis Computer Tips Cables Managed IT Service Search Security Cameras Consultant IT service iPhone HBO Analytics Virtual CIO Knowledge OneDrive Music Biometric Security Telecommuting Skype Project Management Nanotechnology Tablet Peripheral Data loss Digital Security Cameras Cortana Using Data Best Available Domains WIndows 7 Files Outlook Leadership Digital Signature Copiers Troubleshooting 5G Quick Tip IaaS Start Menu Warranty Maintenance Chromecast Screen Mirroring HVAC Bloatware Ergonomics Loyalty Google Apps Smartwatch OLED Colocation Frequently Asked Questions Uninterrupted Power Supply Analysis Development Books PCI DSS Virtual Machine Mobile Administrator Windows 10s Devices Tablets Cast Enterprise Content Management Entrepreneur 2FA Fiber Optics Employee Monitor Cabling User Tip of the week MSP PowerPoint webinar Accountants Windows Media Player Messaging Emergency Policy Employer Employee Relationship Credit Cards Hypervisor Professional Services Microchip Shortcut Public Cloud Thought Leadership Reputation Password Management Cost Management Streaming Media Dark mode Assessment Password Manager Trend Micro Content Default App Managing Stress Windows Server 2008 Social Networking Tech Support SMS Multi-Factor Security Procedure Saving Time Techology Tools Search Engine Laptop Twitter Customers NIST Cameras dark theme Television Business Mangement Shopping Google Search Audiobook IT Infrastructure Running Cable Smart Tech AI Trending FinTech Amazon Bing Touchpad Addiction Memory Public Computer Recycling Social Network Politics Investment Advertising Regulations Wiring Practices Transportation Employees Rootkit Amazon Web Services Employee/Employer Relationships Computer Fan Cache Safe Mode Printer Server Notifications Windows 365 Criminal ISP ROI GDPR Workers Hosted Computing Science Video Conferencing Benefits Sales Online Shopping Bitcoin Shortcuts FENG Wireless Internet Relocation File Sharing Point of Sale IBM Personal Cryptomining Distributed Denial of Service Flash Camera Customer Relationship Management Inventory Supply Chain Management Smart Technology Specifications Analyitcs Monitoring Evernote Batteries Video Games Wire Software Tips Programming Windows 8.1 Supercomputer Digitize Travel Worker Commute Experience Windows Server 2008 R2 Sync Printers Emails Millennials Customer relationships Wireless Charging Scalability Smart Office

      Top Blog

      The reasoning for this is simple: you want to make sure that operations are proceeding as intended, even if you’re not there. If you completely check out from the workplace every time you leave, you could return from your vacation to a complete and total disaster that may have been prevented with y...
      QR-Code