Even if you only have a passing knowledge of financial markets, you’ll know that its operations are strongly tied to technological developments. Trillions of dollars worth of trades are executed every day across ultra-fast fibre-optic networks, while supercomputers are regularly used to attempt to predict market movements.
On a more basic level, the companies that are best able to capitalise on emerging technologies before others tend to do the best on the stock market, as evidenced by the phenomenal success of the likes of Tesla and Apple in recent years.
While all of this is well known, what is perhaps less known is the impact of new and novel technologies on financial trading in 2022. Here’s what you need to know.
One of the most important trends that have not received enough attention is how complicated financial instruments have been made accessible for literally anyone to trade, thanks to technology.
One major example here is so-called futures CFDs, which allow people to speculate on the future price of an asset through a contract with a broker. Previously, these instruments were only accessible to top-level financial institutions. However, there are now desktop futures trading platforms that allow anyone to create an account and instantly start trading major assets on the futures market. This could be a real game-changer.
For obvious reasons, trading exchanges have always been very cautious about their data. For this reason, there have been those who are sceptical about the use of serverless cloud technology to store financial trading data.
However, all of that is transforming. Buoyed by recent developments in the cloud computing space, heavy-hitters such as the NASDAQ and CME Group have signed contracts for Google and AWS to move all of their trading infrastructures to the cloud. This represents one of the largest changes to trading infrastructure since the invention of the stock ticker.
Across financial institutions, the trading desk is where the most important moves take place. However, traders have long complained about being hampered by legacy technology, which makes trading slower and less efficient.
This is often manifested during multi-trade transactions, where traders in New York or London have to re-key information between the many apps and screen banks used in each trade.
However, internet of things (IoT) technology is increasingly being used in major institutions to integrate all the different devices and platforms that traders use daily. If rolled out completely, this could greatly expand the amount of market activity.
Machine learning and NLP
For all traders, data is their most important asset. Data allows them to make sense of financial trends and market moves so that they can make more informed buying and selling decisions.
In order to analyse much greater volumes of data than previously thought possible, traders are now making use of complex machine learning algorithms to get macro-insights that were previously impossible to get.
Traders are making use of Natural Language Processing (NLP) technology to make use of text and voice-based data to gain actionable insights from so-called sentiment data.
Technology is changing financial markets quicker than anyone could have predicted. How this will affect the overall economy remains to be seen, but it most definitely will.