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The financial services industry has long been a proponent of the use of technology. However, when it came to retail offerings, the best technology was often kept in the hands of institutional users. Finally, slowly but surely, the Internet changed everything.
From the method traders used to access the markets to the speed of execution and charting, the late 90s and early 2000s were years of dramatic changes in participation in the stock market. First, inclusiveness has improved by an order of magnitude, resulting in a dramatic increase in the number of day traders attracted to discount brokerage rates and greater affordability.
While the rules of the game still tilted in favor of financial services giants and deep-sea funds investing heavily to maintain a technological advantage, the gap gradually narrowed as these technologies spread to the retail level. detail. In addition, the technology itself has helped improve market conditions and the accessibility of value-added services.
Paul Barroso, co-founder and CEO of Atani, said: There are many instances where trading, portfolio management, technical analysis or tax reporting technology that was once limited to institutions is being filtered to retail customers. For example, take High Frequency Trading (HFT) technologies, which have now become mainstream and used for arbitrage trading. This has a net positive impact on the markets, as it increases liquidity and reduces spreads and slippage.
Stock traders can now create their own algorithms without any coding knowledge, use advanced technical analysis tools directly on charts, and filter and sort trading opportunities based on pre-defined criteria. In addition, they have access to several trading platforms. The point is, while technology in its early years was the big differentiator, it has since been transformed into a great equalizer, gradually improving inclusivity while helping level the playing field with a very lopsided game.
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Money management tools are a premonitory example of this progress. The roll-out of services such as copy-trading and robo-advisory has made asset management and portfolio management public rather than meeting the needs of high net worth individuals. Even research has been fundamentally democratized by technology. For example, Reddit has brought us the world’s largest decentralized hedge fund and an abundance of research and analysis that was once relegated to the sole realm of institutional investing.
Cryptocurrency as the great trading equalizer
In many ways, cryptocurrency builds on this technological advancement. At its core, the goal of early cryptocurrencies was greater financial inclusiveness, whether by banking the unbanked or reducing the presence of custodians, which translated into higher transaction costs. high. (See the comparison of Bitcoin stocks on TipRanks)
Of course, cryptocurrency trading, in particular, has a long way to go, but even now it is advancing at a much faster rate than trading on the stock exchange. The most striking example of this point is the abundance of Decentralized Exchanges (DEX) and Automated Market Maker Platforms (AMMs) that sparked the DeFi revolution.
For traders, the ability to access a purely decentralized trading environment has many advantages. In addition to the tariff component, the tools available have never been so sophisticated. Additionally, yield farming, staking, and lending in these decentralized environments present more democratized opportunities to ordinary investors than at any time in history.
Even centralized encryption platforms perform very well and are steadily expanding their use of technology. Traders can now view the in-depth order book, similar to the Nasdaq Level II service available to institutions and equity trading professionals for years. In addition to charts, many platforms offer built-in news options, allowing more participants to gain fundamental market insight in real time.
In addition, institutional innovation is a key driver of a strong retail user experience in cryptocurrencies. Tomer Niv, director of global crypto solutions at eToro, echoes this point, institutional trading technology can be divided into custody infrastructure, intelligent execution engines, and supporting data analytics. I can say that recent improvements in these three categories have a direct contribution to the quality of services that end clients receive from retail investment platforms.
Niv adds that experiences at the institutional level have positively influenced storage solutions for cryptoassets for all users, including retail … Smart execution engines provide better liquidity and access to money. ‘entire crypto market, which translates to better spreads on retail platforms and supports data analysis. enable retail platforms to implement machine learning algorithms to optimize costs and potentially lower prices for retail customers.
Beyond these technological advances, users can set up automated strategies via API connections with their favorite exchanges. The exchanges themselves break down barriers and reduce frictions in their own right, even going so far as to automate KYC and AML practices that are still sometimes handled offline by stock brokers.
With the rise of blockchain prediction markets alongside the accelerated use of machine learning and artificial intelligence, the industry is always exploring unique new ways to deliver value to crypto traders.
While technology can be seen as a factor of inequality, technology has proven to be the greatest equalizer for generations when it comes to commerce. By largely avoiding the two-tier structure that has dominated the stock market for years, cryptocurrency is a powerful force for democratization in a way that goes beyond innovation in more established markets.
With a bright future and developmental talents keen to carve out a place for themselves in this new business paradigm, the technological revolution that has started in stock trading is simply entering a new phase that will truly create more equal opportunities for all stakeholders and all participants.
Disclosure: Reuben Jackson did not hold any positions with any of the companies mentioned in this article at the time of publication.
Disclaimer: The information contained in this document is for informational purposes only. Nothing in this article should be construed as a solicitation to buy or sell securities.
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