Automated Screen Trading
Automated Screen Trading is a way to buy and sell stuff like stocks, bonds, foreign money, gold, and oil using just computers. You don’t need people in a room yelling and waving papers anymore. The computers take care of everything.
How it works
Automated Screen Trading uses special computer programs and networks to handle all the trading action. Here’s the general idea:
Traders use computers
Instead of being at the New York Stock Exchange in person, traders sit at their own computers. They tell their computer what they want to buy or sell.
Computers “talk” to each other
The trader’s computer sends messages through the internet to the computer systems run by the stock exchange or other trading network.
Computers match buyers and sellers
The exchange computers look at all the buy and sell orders coming in. They match up people who want to buy at a certain price with people who want to sell at that price.
Deals happen fast
When a match is found, the trade is executed right away by the computers, without needing a human to do anything. This all happens super fast, in tiny fractions of a second.
The rise of electronic trading
Automated Screen Trading has gotten really popular in the last few decades. More and more of the world’s buying and selling of financial stuff is done by computers.
Out with the old
It used to be that most trading happened on the floors of stock exchanges. You’ve probably seen pictures of a bunch of people in colorful jackets waving their arms and yelling. That’s how it was done.
In with the new
But computers started taking over more and more of the process. At first they just helped the floor traders do their jobs. But eventually the computers could do the whole thing themselves, faster and cheaper.
Taking over the world (of trading)
Now, Automated Screen Trading is how most financial trading gets done, all over the world. It’s not just stocks – it’s all kinds of financial products and commodities. If it can be traded, it’s probably being traded by computers.
Pros and cons
Like anything, Automated Screen Trading has its good points and bad points. Here are a few of the big ones:
The good stuff
- It’s fast. Computers can do trades way quicker than humans can.
- It’s cheap. You don’t need to pay as many people to do the work.
- It can handle a ton of trades. Computers don’t get tired.
- It can work 24/7. The trading doesn’t have to stop when the humans go home for the day.
The not-so-good stuff
- It can be risky. Computers can make mistakes or misbehave if they’re not programmed right.
- It can cause “flash crashes.” Sometimes the computers all start selling at once, making prices drop really fast.
- It can be confusing. The computer trading systems can be really complex and hard for regular people to understand.
- It can feel unfair. Some people think the computers give an advantage to big banks and hedge funds over regular folks.
The future of trading
Automated Screen Trading is probably here to stay. It’s just too fast and efficient to give up. But it will keep evolving.
Getting smarter
The computer programs that do the trading are getting more and more sophisticated. They’re using artificial intelligence and machine learning to try to make better trades.
Facing regulation
Governments and regulators are keeping an eye on Automated Screen Trading. They want to make sure it’s fair and doesn’t cause too much craziness in the markets. There might be more rules put on it in the future.
Still a human touch
Even with all the computers, there’s still a role for humans in trading. People still make the big strategic decisions, and they’re needed to design and oversee the computer systems. The best trading operations have smart people and smart computers working together.
