Machines are the Future of Trading

Technology will bring us a new breed of trader, and those financial service firms that embrace this change will end up looking more Silicon Valley than Wall Street.

The stock market relies on a rapid, accurate data transfer mechanism to inform players of any price fluctuations within the marketplace. If this mechanism is not functioning properly, information asymmetry will allow the more informed investor to capitalize and profit off his relative advantage. In essence, the faster the rate of information exchange, the higher levels of efficiency financial markets can achieve.

Legend has it that the powerful Rothschild family made an enormous sum in the 19th century, following Napoleon's crushing loss at Waterloo, by virtue of an immediate investment in British government bonds, which would appreciate once Europe stabilized again. As the vastly influential family had learned of the outcome of the battle before even the British government did, they were able to capitalize on their sizable informational advantage and invest accordingly, or so the story goes. In much more recent times, the financial service industry - especially the automated trading providers - has escalated dramatically.

The financial services industry has often been slow to adopt technology but we will see a tectonic change over the next few years. Already there has been a fundamental shift as regulatory and cost pressures have forced the unbundling of banks and forever changed the role of the bank and non-bank customer base in trading. Its impact will be felt across the entire life cycle of a transaction in the future. Firms that provide solutions to support all stages of a trade will come out on top. With their high cost of capital and regulatory restrictions, banks will never be low cost producers. Where previously they would have innovated to create solutions in-house, this task will increasingly fall to other players to fill this void. The potential here is enormous, particularly in the hugely important areas of risk management and risk measurement, where solutions will become ever more sophisticated and integrated. Technology is getting cheaper and the really sophisticated traders are getting younger, smarter and savvier. In this field, computer programmers write complex algorithms for programs that constantly monitor equity price movement, which then execute buy and sell orders when certain predetermined criteria are fulfilled.

Profitability hinges on the speed at which the computer servers can process minute changes in the discounting mechanism of the stock market, as well as the effectiveness of the underlying algorithm. Thus, faster processing systems are of special interest to firms and individuals that engage in these trading techniques, as even a slight informational advantage would be massively profitable.

The rise of high-frequency traders (HFT) and non-bank market-makers in the marketplace will be another key theme for the future. HFTs will become ever bigger and more important as their consistently executed strategy and superior technology overtakes that of the banks. We will see more non-bank electronic trading players stepping out of the shadows to build their brand awareness. For some years now there has been a tidal shift towards electronification and automation in trading. The evolution of smart tools and the wider adoption of artificial intelligence and machine-based learning will significantly alter the industry.

Such smart tools will enable market participants to offer best execution to customers. This goes beyond providing best available price by being capable of providing an assessment on the depth of the order book, depth of the market and real liquidity. The regulatory landscape will ensure that best execution and intelligence on order management and data analytics become increasingly important.

We really are only at the beginning when it comes to the opportunity that exists for technology to profoundly change what we recognise today as 'trading' - but I, for one, feel very excited about its future.

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At NavigatorFX, we believe that the financial world is about to change. We are on a mission to revolutionize the outdated banking sector.

Dispruptive - Global - Mission: NavigatorFX focuses on disruptive concepts and business ideas. We don't copy, we disrupt. NavigatorFX disrupts the outdated financial sector through simplicity, transparency and usability. NavigatorFX identifies and builds disruptive business models. We aim to bring the advantages of financial technology to the masses – making financial markets more accessible to everyone.

NavigatorFX.com
Andreas Cara

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40470 Düsseldorf, GERMANY

Mail: info@navigatorfx.com
Phone: +49 (0) 211 987 40 456
Web: www.NavigatorFX.com

This release was published on openPR.