The financial trading industry (i.e. buying and selling financial assets such as stocks, bonds, foreign currency, and company equity), has, until recently, remained conservative, bound with paperwork, and relying on traditional tools like fax and e-mail. Today, though, the use of automated Trading Systems has become a true game-changer and accounts for faster, easier, and more secure transactions.
Algorithmic Trading Systems work by the rules set by traders and, once programmed, execute these rules automatically. As such, Trading Systems require the use of specialized software, and the set of rules must be written in a language specific to this particular software platform.
Some of the emerging technologies currently applied in digital Trading Systems are:
– Blockchain. The distributed ledger provides digital storage space for contracts and offers parties a secure way of conducting international transactions and processing payments. At 8allocate we have extensive experience in building solutions for blockchain platforms like Skycoin.
– Machine Learning and AI. ML and artificial intelligence help traders capture and analyze millions of data points, and make accurate decisions. ML and AI are finding wider application in investment and stock trading.
– Money transfer services. Online and mobile money transfer services help transfer money from stocks and asset trading directly into the trader’s bank accounts. At our 8allocate R&D center, we maintain ongoing cooperation with one of the world’s leading payment transfer providers, helping improve and support their services.
Digital Trading Systems are gaining increasingly wider traction these days. Below, we will look at some stats on the current situation in financial Trading Systems, explore their benefits, and learn about some of the most prominent companies behind the popular systems for algorithmic trading.
Stats on Current Situation in Trading Systems
According to Investopedia, automated Trading Systems currently account for about 75% of shares traded on stock trading exchanges in the United States. By the beginning of 2020, worldwide financial stock exchange capitalization has reached $85 trillion, increasing by 320% since 2009. As much as 52% of US adults have money in stock markets. Currently, despite the detrimental impact of the COVID-19 pandemic on global finance, it looks like we are set to witness the increasing proliferation of systems for algorithmic trading, as the economy starts to recover.
As such, navigating volatile financial markets requires advanced analytical skills, composure, and the ability to instantly respond to a changing situation. This is when automating Trading Systems offer traders a helping hand.
The benefits of digital Trading Systems include:
- Eliminating emotions and human error;
- Testing the trading rules for viability using historical data;
- Non-disruptive trading in spite of emotional factors;
- Accelerated response to changing market conditions;
- Using multiple accounts and trading strategies simultaneously.
Trading Systems Examples
Surely, automated systems are prone, to some extent, to malfunction and failure, but the benefits still outnumber the downsides. Below we list some of the top-rated online Trading Systems as of the year 2020.
Ameritrade: This is considered to be one of the best online trading systems for beginners. The platform offers education opportunities and helps newcomers learn the basics of trading. In addition, it offers 9 free hours of programming and a plethora of useful content. It is also available in a mobile version and the mobile app has an easy-to-use interface.
Fidelity Investments: This trading platform enables investors to run excellent trade executions, offers in-depth research and top-notch customization opportunities. On top of that, fidelity Investments automatically transfers your uninvested cash into a money market fund.
Interactive Brokers: Interactive Brokers is a sophisticated platform with a range of analytic tools, and is probably, the best choice for experienced traders. It’s also considered the best platform for international trading, offering investors and traders access to 125 exchanges in 31 countries worldwide.
Tastyworks: This trading platform is tailored specifically for options trading, has a diverse set of analytic tools, and brings its users daily trading tips, ideas, and updates in a video format.
E-trade: One of the long-established platforms, E-trade operates in the US only and is notable for its low fees (free stock and Exchange Traded Fund trading), has excellent analytic and research tools, and an easy-to-use mobile version.
These types of Trading Systems are oriented at traditional, tried and true assets like ETF, stocks, currency and precious metals. Needless to say, they are the most demanded types. Apart from the traditional trading systems, there are blockchain-based trading systems, oriented at cryptocurrencies. These systems come in two categories: centralized, i.e. requiring broker intervention, and decentralized peer-to-peer networks.
Each of these platforms is different in terms of complexity, trading type, and usability, and has its upsides, as well as downsides. When it comes to financial trading, there are plenty of niches that you may tap to, if you need to build a unique Trading System for any specific user category.
Trading Systems and The Future of Trading
When it comes to building Trading Systems, businesses tend to overlook the trading platform ability to adjust to the emerging tech. Yet, today, when the pace of digital transformation defies imagination, making your Trading System future-ready is mandatory. Let’s now take a brief look at the future trends in trading.
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Data analytics will be pervasive
Traders will continue to rely more and more on data analytics when making trading and financial decisions. However, most traders doubt that machines will ever completely replace human intuition. Rather, humans and machines will work in-sync, with traders making their decisions based on advanced data analytics provided by automated data crunching systems.
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Cybersecurity is becoming a top priority
When asked about trends that will shape the future of trading, most traders say cybersecurity will be of utmost importance. The future-ready Trading Platform will need to be fully equipped to withstand hacker and data theft attacks. Real-time risk assessment and security monitoring should become the default settings of any top-notch Trading Platform.
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Trade Performance analytics will be becoming more impactful
Another trend that traders consider the most impactful (as per “The future of trading report” by Refinitiv), is trade performance analytics. Trading systems capable of analyzing customer relationships and individual trades will be in high demand. By using Trade performance reviews for pre-trade analytics, traders have the potential to increase efficiency and reduce bottom line expenses.
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AI will continue to shape the future of trading
Most of today’s trading algorithms are programmed by humans. However, with further development of technologies such as machine learning and deep learning, Trading Platforms will be capable of building sophisticated trading algorithms without human intervention. The trend is towards further digitization and automation leading to accelerating trading transactions to nanoseconds. All in all, traders view AI and nascent technologies as the most disruptive, and would like to see them deeply integrated into Trading platforms.
According to Greenwich Associates 2019 Future of Trading Study, 44% of firms currently use AI for financial trading, while 17% plan to incorporate it in the near future. High development costs, however, and the lack of AI talent stand in the way of deeper integration of AI into Trading Platforms. With this regard, fintech AI outsourcing appears as a viable alternative to costly local services.
8allocate experts at our Kyiv-based R&D Center have vast experience in building solutions for the Fintech industry. Have a trading platform idea that you want to bring to life? Contact us now for a free consultation.
Final Thoughts:
Surely, there are lots of legal aspects to consider before you plunge into Trading Systems development. You will have to get a license and a permit to operate in each of the countries that you plan to cover by your trading platform. Most importantly, you will have to prove your dedication to security and data-protection and partake in various programs aimed at protecting investors.
Another thing worth considering is your competitors. Knowing their strengths and weaknesses will help you come up with unique offerings and win the hearts of both new and experienced traders.
At 8allocate we start off at the product discovery phase. By envisioning the user journey and taking into account the requirements of the platform’s key stakeholders, we develop detailed and comprehensive product specifications before we start building a trading platform. Check out our portfolio of Fintech projects to get a glimpse of our skills and experience.
