ANALYSIS

Trading Technology and Stock Market Liquidity: A Global Perspective

Trading Technology and Stock Market Liquidity: A Global Perspective

Strengths of the Analysis

The paper discusses the stock market liquidity and trading technology which is an important phenomenon to study as the liquidity of a financial market that is stock market is the ability to buy or sell assets quickly quoted thereon without having a major effect on prices. Moreover, more liquid the market, the easier it is, quick and inexpensive way to make transactions. This feature is one of the essential qualities that must guarantee the stock exchanges (Jain and Johnson, 2006). The study characterizes and also assesses the effects of revolution of technological that has made its impact on the financial markets around the world; moreover, the study shows that importance technology in context of satellite communication and computerization which has altered the management of stock markets and significantly enhanced the performance of the stock market liquidity.

The markets based on where trading technology exists; there are three major differences as compared to traditional markets. The trading platform is provided electronically, which facilitates access for members at a distance. While this may seem commonplace, until very recently, most markets were loud. The fact that these markets are has facilitated fully electronic brokerage firms from many places remote can be connected to improving market liquidity.

Moreover, the requirements for admission to trading are different from traditional markets signals. Because transparency is critical to assess the risk of investment, the publication requirements of relevant information are even more demanding than in traditional markets. The profit requirement is replaced by volume requirements of equity, sales or assets, usually a firm must act as sponsor that is market maker, requires a minimum of shareholders, a minimum free float, etc.

The most important feature of these markets is the existence of creators market to ensure liquidity of the securities. In traditional markets enter orders to buy or sell who marry automatically if there is counter- game. In technology markets there is an obligation to appoint creators to foster market liquidity of the same due to small size of some values. The goal is to provide liquidity to the securities to reduce the discount in securities ration is the shortage of liquidity. Market makers are required at all times to enter the price they are willing to buy and sell maximum number of shares of a company, so that it guarantees liquidity.

The study shows that due to the trading technology the trading turnover has increased which has made its impact on the number of transactions and also the costs of transactions which has decreased due to improvement in technology (Jain and Johnson, 2006). In addition to this, the paper presents that importance of technology in the stock market which has also increased the number of participants in the stock market supplying liquidity. Therefore, it reflects that due to the presence of high liquidity in stock market, the stocks becomes more attractive investment for the investors which decreases the equity ...