Almost a third of the world’s population now owns a smartphone, resulting in an increase in the number of mobile trading applications available to financial traders. That’s according to a recent infographic, which estimates that there are some 45 million financial traders operating worldwide today. That’s more than double the amount forecasted at the turn of the millennium when the tech to liaise with financial brokers on the move via mobile phones had only just been introduced to the mass public.
If we look a little deeper at IG’s infographic, titled “How Has Technology Shaped Trading?”, we can discover that the United States of America remains the biggest trading market on the planet with some $41.4 trillion worth of shares traded on the stock market. That’s closely followed by China ($39.3 trillion), while Japan ($5.5 trillion) is a distant third.
CommSec’s Richard Burns said that even by the end of 2013, 30% of share trading was carried out on smartphone devices. It’s quite possible that forex and shares trading could be carried out solely on mobile trading apps that provide investors with access to tens of thousands of markets on smartphones and tablets.
The reason why the US contributes so heavily to the stock markets is due to its involvement in the innovation of high-frequency trading. Wall Street has been revolutionized by high-frequency trading, adopting highly powered trading algorithms to make ultra-fast transactions when market conditions suit.
Long gone are the days of alpha males doing battle on the Wall Street floors screaming bid-ask prices. Those days have given way to an industry powered by complex algorithms, allowing traders and hedge funds to react fast to emerging market trends, exploiting those trends for lightning-quick profits. In recent years, high-frequency trading has accounted for more than 50% of all equity trades, with gross profits yielding from these algorithms said to be as much as $5 billion per annum.
In Australia, a burgeoning market for financial trading, the nation’s stock exchange (ASX) underwent a significant overhaul of its technology systems in 2015 in a bid to introduce innovative trading services including over-the-counter (OTC) clearing, due largely to rising competition and a perceived weakness in derivatives – the biggest source of revenue for ASX at the time.
ASX’s complete trading and post-trade infrastructure was replaced during a two-year cycle, beginning with the exchange’s equities and derivatives systems. ASX’s chief executive, Elmer Funke Kupper, believes this $35m investment will deliver “greater innovation to Australia’s financial markets” in the long term, helping to “reduce internal costs” for existing ASX clients and also “improve time to market for new products”.
Looking at new asset classes to revolutionize the world of financial trading, there is one asset on the lips of every innovative financial trader today – cryptocurrency. In Japan, the third-largest market on the planet for trading stocks and shares, they have embraced cryptocurrencies fully; so much so that Japanese banks have explored creating their own digital currency called J-Coin. According to figures from Japan’s Financial Services Agency (FSA), as of March 2018, some 3.5 million Japanese traders bought and sold cryptocurrencies on more than a dozen cryptocurrency exchanges.
The FSA said that, despite certain governments clamping down on the use of cryptocurrencies (Russia and China included), Japan was the epicentre for digital asset trading. As Bitcoin trading becomes more commonplace, so too will the use of blockchain technology in financial trading. Blockchain-based trading ledgers could be the future, helping to automate the settlement, audit and confirmation of transactions; not just for cryptocurrencies but traditional stocks and shares too.
It’s undoubtedly an exciting time for those new to financial trading. With fintech hubs in the UK, Silicon Valley and New York continuing to innovate, the possibilities for the stock markets of the future are almost endless.