The worlds of investment and technology both move incredibly fast. They are also two industries that are increasingly dependent upon one another. Ever since the dot-com bubble in the 90’s, the tech industry has shed its renegade image and joined the mainstream of the business world. Tech companies no longer provide us just with consumer electronics. The role of modern tech businesses is now multi-faceted and their products and services touch on every corner of our day to day lives.
Every sector of the technology industry has benefited from the growing interest that traditional investors have shown. But the technology industry has long since repaid the favor, and then some! Technology has played a key role in determining the state and direction of the investment world we see before us today. Tech investors like Mike A Robinson represent the point at which these two worlds meet, applying their expertise in both fields in order to drive the evolution of both tech and investment. The following technologies are those that have had the biggest impact on the world of investing.
Terminals
For most of us, a terminal is simply a display device. However, what most people don’t know is that terminals were initially dedicated to trading. Computerized trading terminals allow a trader to see a visual representation of data by simply pressing a few keys. It is hard to overstate just what a revolutionary innovation these terminals were.
Naturally, the terminals of today are much more complex and advanced than those of the 1960s. Companies like Bloomberg and Reuters make use of cloud-based software, which can be uploaded onto any computer. This means that investors can quickly and easily view the latest statistics and market news. Don’t get too excited though, access to one of these terminals costs around $20,000 a year.
Circuit Breakers
Circuit breakers are another seemingly mundane innovation that has made a tremendous difference to the stability of financial markets. Circuit breakers are used as an effective means of controlling panic-selling and other events which cause abnormal drops in price. When the value of a particular stock or security is identified as being abnormally volatile, the circuit breakers kick in and prevent any more trades involving that security.
Circuit breakers were first introduced following Black Monday. On Monday October 19th, 1987, the Dow Jones Industrial Average (DJIA) suffered a 22.6% drop over the course of a single day. This caused a catastrophic market crash that is still infamous today.
Online Trading
When electronic trading was first introduced, it had a radical effect on the way that stock markets operated. For one thing, it opened the door for relatively low-volume traders to begin interacting with stock exchanges digitally. This in turn made investment possible for people who would previously have been priced out of the game.
Since then, the advent of online trading has further reduced the barriers to investing. When electronic trading first hit the scene, it greatly reduced the reliance on brokers. The subsequent arrival of online trading then overhauled the role of brokers. Before online trading became commonplace, making a trade would require the investor to place their trade through either a financial advisor or a full-service broker. This would inevitably involve having to pay a commission, usually around 2.5%.
Over the last 30-40 years, however, brokerages have developed their own online platforms which provide individuals investing from home with the information they need to decide on what trades to make, and the means to make them. Coupled with the widespread availability of information regarding how to invest, and information about various investment targets, online trading has allowed individuals to invest with ease.
Smartphones
Modern smartphones seem capable of doing just about anything. It is little surprise to learn that smartphones are being used by investors in a variety of ways. They don’t just provide their owners with access to online trading capabilities while on the go, there are also a range of apps dedicated to providing users with both the information useful for making trades, and the means to do so from their devices.
Smartphones also provide their owners with access to personal finance apps which make it a lot easier for them to manage their money and to track the success or failure of their various investments. Being able to manage your personal and professional investment finances from a single device represents a dramatic shift from the previous situation. Coupled with the ability to invest using ‘spare change’ this has helped to spur the emergence of a new breed of everyday investors who are making relatively low-volume investments in their spare time.
Big Data
There is a tremendous amount of data available to the modern investor. This goes a long way beyond the simple reporting of current prices and values though. There is both data regarding the markets themselves, and data regarding the businesses and securities who are trading on them. These data sets are used by both the market regulators and the investors in order to monitor the markets and react dynamically to any changes.
Perhaps the most prominent application of big data for investing is in the form of high-frequency trading (HFT). HFT is an algorithmic approach the investing, in which a computer system monitors the performance of various securities and options, executing trades based on market trends over periods of fractions of a second. HFT has proven to be highly controversial and has created problems for market regulators. In fact, HFT is believed to have been partly responsible for the flash crash of May 6 2010, although others argue that it in fact mitigated the effects of the crash.
The worlds of technology and investing have been dependent upon one another for some time. However, this codependency has grown in recent years. While the attention of large investment firms has undoubtedly played a large role in encouraging innovation in the tech space, technology has gradually reduced the barriers to investing so that, today, anyone with a smartphone can begin making investments.
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