The Effects of Information Technology in the USA Financial Market: Understanding the Role of Internet in Stock Market Participation

The Effects of Information Technology in the USA Financial Market: Understanding the Role of Internet in Stock Market Participation

Introduction

Technology has always played a vital role in the evolvement of financial markets. It is the introduction of newer technology which has paved way for a developed network to be established to meet the growing needs of the modern and technologically equipped world of today (Crooks, et al., 2011). Every time an introduction of a promising technology was brought in the financial market, it has played a tremendous role in changing the entire structure of the market. A great technological development which was witnessed in the previous years was the advent of making mathematical formulas available particularly for the pricing options, and it went to blossom the success of the derivatives market of United States of America. Also, there has been much debate over the primacy of New York Exchange as compared to the Philadelphia Stock Exchange on the basis of the fact that New York attracted higher liquidity in form of orders which were collected over the telegraph. However, in the absence of telegraph, both of these renowned stock exchanges of USA could have survived equally, but only when technology was incorporated, the implementation of telegraph, it eventually led to one of these two stock exchanges to be declared supreme as compared to the other (Madura, 2012).

The development and exponential growth of the internet is most certainly the most noteworthy advancements in technology which have been registered in the last century. Internet encompasses a wide array of matters in life, and holds the potential to impact almost every aspect of our life. Much has been discussed about the impacts that internet has in the economic literature. There have been numerous researches which have sought to explore the relationship of various variables with internet, such as the effect internet has on price competition, taxes, international trade and productivity growth of USA have been studied in detail (Ilyina & Samaneigo, 2011). Though, much has been already been researched on internet and finance, but one of the major aspects still remain unexplored, this paper seeks to explore all such possibilities and areas which are integral, yet have been overlooked.

Discussion

Direct Impact of Internet on Financial Market

Internet has an intense and comprehensive impact on the financial markets of the modern world of today. Internet has always been known for facilitating the flow of information, and rightly so, it has had a great impact on the financial market of USA (Cliff, et al., 2011). The flow of information particularly in the field of financial market includes the information which is used for purpose of evaluation and facilitating the analysts in making their reports. It also impacts the flow of information which is being done through the use of software and allows the dissemination, as well as evaluation of the data in a timely and effective ...