The History of Electronic Trading
Historically, the trading of stocks and bonds has been done at specific locations where buyers and sellers could meet to discuss and haggle. As communications improved during the 20th century, however, more and more trading has been done at a distance, electronically.
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NASDAQ
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The first major electronic trading market was the NASDAQ, established in 1971. Originally, the exchange was merely an electronic bulletin board, which made public the bid price and the ask price.
Further Adoption
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In 1992, the revered Chicago Mercantile Exchange, founded 1898, opened its own electronic trading exchange, Globex. In 1997, the London Stock Exchange, founded in 1801, opened its own electronic service. It soon became apparent that the future of trading would be in cyberspace.
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Online Brokerages
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In the late 1990s older firms, such as Charles Schwab, and newer firms such as E*Trade, allowed individuals to trade stocks themselves on their computers, without a broker. This further opened stock trading to the regular person and led to the rise of amateur day trading.
Algorithmic Trading
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Another innovation in electronic trading occurred during the early 2000s that has defenders and detractors. Algorithmic trading involves the use of computers to do high-speed trading and selling of securities at a rate that is humanly impossible.
Fun Fact
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NASDAQ originally stood as an acronym for "National Association of Securities Dealers Automated Quotations," but the exchange now declares that NASDAQ is no longer an acronym but rather the official name of the exchange.
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