Electronic or scripless trading, sometimes called e-trading or paperless trading is a method of trading securities (such as stocks, and bonds), foreign exchange, or financial derivatives electronically.
Electronic or scripless trading, sometimes called e-trading or paperless trading is a method of trading securities (such as stocks, and bonds), foreign exchange, or financial derivatives electronically.
According to Wikipedia Information technology is used to bring together buyers and sellers through an electronic trading platform and network to create virtual marketplaces.
They can include various exchange-based systems, such as NASDAQ, NYSE Arca, and Globex, as well as other types of trading platforms, such as electronic communication networks (ECNs), alternative trading systems, crossing networks, and “dark pools”.
Electronic trading is rapidly replacing human trading in global securities markets. Electronic trading is in contrast to older floor trading and phone trading and has several advantages, but glitches and canceled trades do still occur.
The move to electronic trading compared to floor trading continued to increase with many of the major exchanges around the world moving from floor trading to completely electronic trading.
Trading in the financial markets can broadly be split into two groups:
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Business-to-business (B2B) trading, often conducted on exchanges, where large investment banks and brokers trade directly with one another, transacting large amounts of securities, and Business-to-consumer (B2C) trading, where retail (e.g. individuals buying and selling relatively small amounts of stocks and shares) and institutional clients (e.g. hedge funds, fund managers or insurance companies, trading far larger amounts of securities) buy and sell from brokers or “dealers”, who act as middle-men between the clients and the B2B markets.
While the majority of retail trading in the United States happens over the Internet, retail trading volumes are dwarfed by institutional, inter-dealer, and exchange trading. However, in developing economies, especially in Asia, retail trading constitutes a significant portion of overall trading volume.
For instruments that are not exchange-traded (e.g. US treasury bonds), the inter-dealer market substitutes for the exchange. This is where dealers trade directly with one another or through inter-dealer brokers (i.e. companies like GFI Group, ICAP, and BGC Partners.
They acted as middlemen between dealers such as investment banks). This type of trading traditionally took place over the phone but brokers moved to offer electronic trading services instead.
Similarly, B2C trading traditionally happened over the phone and, while some still do, more brokers are allowing their clients to place orders using electronic systems.
Many retail (or “discount”) brokers (e.g. Charles Schwab, E-Trade) went online during the late 1990s and most retail stock-broking probably takes place over the web now.
In conclusion, in the developed world, the majority of retail trading happens over the Internet, in developing economies, especially in Asia and Africa, retail trading constitutes a significant portion of overall trading volumes. Electronic trading is rapidly replacing human trading in global securities markets.
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