Journal of Economic Perspectives
ISSN 0895-3309 (Print) | ISSN 1944-7965 (Online)
Electronic Trading in Stock Markets
Journal of Economic Perspectives
vol. 20,
no. 1, Winter 2006
(pp. 153–174)
(Complimentary)
Abstract
Modern trading technology clashes with the traditional organization of a stock exchange, where transactions were consummated via face-to-face negotiation. The modern trading facility is no longer a place. Rather, it is a computer system over which transactions are entered, routed, executed and cleared electronically with little or no human intervention. In this article, I examine how electronic trading has altered stock markets. I begin with an overview of how the stock trading process works and then address a number of questions. How have the jobs of traditional stock market dealers on the NYSE and on Nasdaq been affected by electronic trading? How do electronic communications networks differ from traditional markets? How has electronic trading affected bid-ask spreads and commission costs? What subtle issues arise in electronic trading when dealer and customer interests diverge? Will computer programs replace human judgment? What is the effect of electronic trading on the number and types of securities markets? What is the role of regulation in electronic markets?Citation
Stoll, Hans, R. 2006. "Electronic Trading in Stock Markets." Journal of Economic Perspectives, 20 (1): 153–174. DOI: 10.1257/089533006776526067JEL Classification
- G10 General Financial Markets: General (includes Measurement and Data)
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