Mostly… fixed income and cross product eTrading

September 5, 2006

the Electronic Revolution

Filed under: 2015, etrading — holky @ 7:31 am

There have been two notable publications over the past year or so that were really worth looking at. Both capture the essence that massive change is upon us. Both suggest we are in the early days of the Electronic Revolution, a revolution that will change the financial markets industry beyond recognition, just like the Agricultural and Industrial revolutions have changed the world before us.

1. Yes we know that electronic trading is increasing transparency in the market and that market data is becoming more widely available. The IBM The trader is dead-long live the trader paper projects forward on this to conclude that once transparency is such that everybody knows everything.. instantaneously, financial markets firms that have previously benefitted from leveraging access to proprietary market information and insight will no longer have this advantage. Consequently the industry will see substantial change in the next 10 years. There will be less buyside, sellside, processor differentiation as focus has shifted from a transaction perspective to one that is truly centered and optimized on servicing demanding clients (retail / institutional). Excess agency profits have evaporated, alpha and beta seperation is completed, and so it is the creation of critical alliances with a customer focus that will drive the change and add value to the market by effectively assuming and managing risk, or by mitigating it either by taking it out of the overall system or by reducing it for their clients.

2. AmazonBay from Sean. So why won’t the entities that are already processing millions of electronic transactions per day leverage their massive electronic processing ability by turning their attentions to the provision of electronic financial services? As and when they do, what happens to the current participants of the financial markets?

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3 Comments »

  1. […] Via Mostly I found a paper from IBM called “The trader is dead, long live the trader!”. What a great paper, I can’t believe I missed it to this point. I have for some years been working at auto-trading with a few clients/ partners. More specifically – I had been working on optimization software to train, test, verify and moreover tune auto-trading systems. This paper, and the other elaborate drama referenced in the Mostly post talk about the future of the financial markets. Of course – all predictions must be taken as that – but for years we have been talking about the ideas discussed in the IBM paper. […]

    Pingback by Chris Donnan : Programming - Brooklyn Style - The future of the financial markets — September 10, 2006 @ 4:59 pm

  2. this forum thread contains some additional (+ interesting?) comment on a post that is remarkably similar to my original words.

    http://www.elitetrader.com/vb/showthread.php?s=4881f4d6ec6cacecd09f9e0e9818982f&threadid=79676

    Comment by holky — October 30, 2006 @ 10:26 am

  3. […] also see 2015 category and the electronic revolution.   […]

    Pingback by What Can We Learn From Retail e Transactions? « Mostly… — April 26, 2007 @ 8:06 am


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