How Technology is Affecting the Financial Markets.

 

Technology is shaping many different areas of the world, it is speeding up manufacturing, improving our quality of life, making many aspects of life more efficient and effective. One area that has been revolutionized by the advances of technology itself is the financial markets and the stock market. There are several ways how technology has changed and shaped the current state of the markets, and also the future direction. Firstly, ease of use, through technology it is now easier than ever to trade on the stock market, secondly speed, making transactions is faster than ever, and finally depth of information.
Ease of Use

 

 

Apps Like Robinhood

Apps like RobinHood Trading has made it easier than ever to access stock market trading. By being a technology driven brokerage they are able to operate with substantially less overheads seeing a significant reduction in fees. These fees often make casual traders be turned off the idea of the stock market, as low amounts they want to invest will not be worthwhile after paying the various fees to most companies. This has seen a new type of trader, with a lower amount of wealth be able to effectively utilize the markets.
Additionally since it is an app that is available on smartphones, it allows for people to trade anytime and anywhere. This means people are a lot less restricted in trading, and may encourage more people to trade as it is easier than ever. This unrestricted method opens up a wide range of possibilities, and overtime, may influence the way trades are conducted.
Also there are several different types of software and websites that offers free trading. Effectively allowing you to play with “pretend” money to give you a learning experience. This is simpler than ever to use and can easily help you track investments and give you a good immersive experience before risking your own money.
Speed of transactions.

The speed of transactions are now faster than ever. Traditionally trades were done by shouting from one human to another, then through telephones and now the internet. With faster transactions more trades are occurring, and when market changes are occurring, investors can react as quicker than ever. Quicker reaction to new information will mean the markets are constantly changing faster than ever.
Depth and Availability of Information.

Due to the rise of the internet the availability of information allowing people to make an informed decision is easier than ever. Instead of relying on other people’s recommendations and analysis it is extremely easy to access company reports and see for yourself whether or not it would be a good investment. The information is now more in-depth as well, as technology is able to perform complicated algorithms to analyse company data to allow you to form a more educated opinion. Many companies provide real time data on the stock markets, allowing you to see completely up to date information and see the start of any potential trends allowing you to capitalise and take advantage of the changing market.

NEW YORK, NY – JUNE 21: ING Groep N.V. CEO Jan Hommen rings the opening bell at the New York Stock Exchange on June 21, 2012 in New York City. (Photo by Ben Hider/NYSE Euronext)

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The Future of Wall Street is On Line

 

Investment bankers were the lords of Wall Street for a long time. However, things started to change after the 2007 financial crisis. Lehman Brothers filed for bankruptcy and led to greater scrutiny of the operations of other Wall Street bankers.

It was during at same time when Morgan Stanley and Goldman Sachs decided to become bank holding companies so that they can gain access to the Federal Reserve’s discount window. By transforming into bank holding companies, the two firms are able to tap into deposits from their retail customers.

      Difference between Investment Bank and Bank Holding Company

An investment banks help governments and companies raise funds by issuing and selling securities. They also provide advice on other financial transactions, such as acquisitions and mergers. Although they are regulated by the Securities and Exchange Commission, they operate with less supervision compared to commercial banks.

A bank holding company is an umbrella corporation that operates commercial banks that include accepting deposits from their customers. They are supervised by the Federal Reserve, as well as the Federal Deposit Insurance Corporation.

After the two firms became bank holding companies, there are no independent investment banks operating in Wall Street. Citigroup remained the largest holding company in the United States, followed by JP Morgan.

                             What’s Next for Wall Street Banking

Morgan Stanley and Goldman Sachs are still able to engage in their investment banking activities even after they became bank holding companies. However, their operations will be under the supervision of the Fed.

Going to the Cloud

Financial services are now moving to the cloud. Trading firms and asset managers are in the process of moving all their data to the cloud. As the technology advanced, cloud servers have become more safe and secure. Plus, they offer flexibility and agility to their customers.

Cloud computing has become more important in the past couple of years, that there are talks of the death of traditional brokerage firms. It will not be long when companies don’t need Wall Street bankers. Instead, they can do their business in the cloud, just like in the real estate and travel industries.

wall street cloud text on blue sky, business concept

One of the main roles of an investment bank is to serve as the third party between corporations and investors through initial public offerings. Investment banks offer underwriting services for new stock issues once the company goes public and looks for equity funding.

In the future, FinTech companies are able to offer the same services through cloud computing. Such company can partner with several banks to reduce exposure of a single bank. Everything will be transparent to ensure all transactions comply with existing rules and regulations.

The 2007 financial crisis has exposed the weaknesses of Wall Street banks. It is time to be gone with the old ways of doing things on Wall Street, and adopt new methods and technologies to make things more secure, safe and convenient for all stakeholders. And the key to all this is cloud computing.

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