Electronic trading

From MarketsWiki

Electronic trading, either directly with counterparties or through an on-line intermediary, has transformed traditional methods of trading through exchanges. Rather than join the exchange and trade from the floor, Institutional investors, broker-dealers and market-makers can trade directly via an Electronic Communications Network, or ECN, which automatically matches buy and sell orders at specified prices. ECNs register with the SEC as broker-dealers.

Individual investors and retail traders usually access ECNs through an account with a broker-dealer subscriber that allows the trader access to its trading platform, which lets customers do research and execute orders from their computers. Platforms usually differ by the markets they trade - futures and commodities, options, stocks or currencies (forex)^[1] - although brokers that trade all markets will generally offer separate trading platforms for each. Long-time online-trading powerhouse TradeStation recently took the industry's top award for electronic brokerage on the strength of it trading-platform technology.^[2]

Initially, electronic trading was done only "after-hours" and just augmented trading during regular exchange hours. Exchanges promised this electronic "after-hours trading" would not supplant the trading floor,^[3] although a growing number of floor traders are going electronic anyway.

Barron's best

Barron's magazine's top-10 electronic brokerages, ranked in March 2008

• TradeStation Securities
• thinkorswim
• Interactive Brokers
• OptionsXpress
• Fidelity Investments
• TradeKing
• MB Trading
• OptionsHouse
• Muriel Siebert
• E*Trade Securities

References

1. ↑ Trading Platforms. YourTradingSystem.com. Retrieved on June 16, 2008.
2. ↑ Making It Click: Annual Ranking Of the Best Online Brokers. Barron's. Retrieved on June 16, 2008.
3. ↑ Electronic Trading's Past & Future. SFO Magazine. Retrieved on May 27, 2008.