Nerds on Wall Street: Math, Machines, and Wired Markets

2.1. Financial Technology Stars

There are some clear nominees for the Financial Technology Hall of Fame, which have brought widespread, nearly universal, changes in the way people view and participate in markets. Topping my list are the following:

• Electronic market access

• Market data graphics

• Spreadsheets

• Databases and Internet information

For quantitative investors, I would add portfolio optimization despite the barriers to wider acceptance of this technology such as sensitivity to errors and unintuitive results (unless they are constrained).

2.1.1. Electronic Market Access

Thirty years ago, the Designated Order Turnaround (DOT) and NASDAQ electronic systems were concepts on their way to notions. A so-called program trade literally involved wheelbarrows of paper trade tickets physically distributed to floor traders.

Today, trading floors from London to Tokyo have been replaced by machinery. Purely electronic markets, the electronic communication networks (ECNs), have come from nowhere to claim a significant portion of volume. Increasingly, the discussion of the future of exchanges is a discussion of technology. The August 16, 1999, cover of the Industry Standard, an information technology trade magazine, proclaimed "Stock Exchanges: RIP." The photogenic trading floors, such the one at the New York Stock Exchange (Figure 2.1), are being closed, downsized, and relegated to use as media backdrops for financial reporters around the world.

The ongoing refinement of the techniques of ...