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

2.4. Future Technological Stars

As Niels Bohr stated: "Prediction is very difficult, especially about the future." Nevertheless, I will venture to describe the technological areas that are important to investors and traders:

• Advanced electronic market tools. All investors trade on their own or through brokers. More than half of all trading is now automated, much more for U.S. stocks. As markets become more transparent and electronic, the growth of algorithmic trading will become more important to both buy- and sell-side traders. Off-the-shelf algo strategies are widely used today, and more sophisticated strategies are used by technology leaders. As seen in many other contexts, the complex versions will become more accessible in the future.

• Understanding both quantitative and qualitative information. Investment decisions are made based on a mix of information, which includes numerical, graphical, and textual material. Essential precursors to understanding are collection, extraction, aggregation, and categorization. These are useful in both automated and semi-automated settings for different investing styles. Search engines and other language-based tools will progress dramatically, with specialized systems to extract relevant portions, combine them, and categorize information from text.

The following sections discuss these topics in more depth.

2.4.1. Dominance of Electronic Trading

It is very likely that in the near future we might read something like an obituary for the stock ...