The title of a recent blog post, “How Fast Should You Trade”, brought me back to the early ’90s and one of my favorite rap songs, “Sometimes I Rhyme Slow Sometimes I Rhyme Quick”, by Nice and Smooth.
The massive amount of market data available in the current day is both a boon and a burden. More information can lead to making smarter decisions, but does the glut of data lead somewhat to paralysis by analysis?
The rise of electronic and algorithmic trading has irrevocably changed how the financial markets operate. Equity markets have been known to be almost entirely electronic since 2015. Moreover, according to Greenwich Associates, over 90% of equity flows are executed electronically in liquid, developed markets like the U.S. It’s no secret that floor trading has dwindled. Just take a look at the floor of the New York Stock Exchange. When I was a specialist, there were thousands of traders and market makers on the floor of the exchange, but in the past decade or so that number has dropped to only a few hundred.
Traders have always strived to attain high quality executions, but measuring execution quality is now more important than ever.
In an environment where nearly all trading is done electronically, it’s important to consider the added benefits of human judgement and flexibility that floor brokers may offer.
Aligning technology and people can be a difficult task. Historically as technology is introduced in an industry it is done so at the expense of collaboration, as it attempts to streamline or make efficient the process it is intended to improve.