Digital technology has disrupted many an industry over the last few years, but perhaps none more so than the business of trading stocks.

High frequency traders tripled their share of the U.S. equity market from 20 percent in 2005 to 60 percent in 2008, although that share has since fallen to about 53 percent, according to RBC Capital Markets. Using high-speed, fiber-optic networks and sophisticated computer algorithms, traders can execute orders at speeds that were unthinkable just a few years ago. “We have found that anything north of 500 microseconds just isn’t fast enough,” says Rich Steiner, head of market structure strategy at RBC. That technology has driven many changes in the equity business including altered margins, new liquidity and trading patterns, and the rise of alternative exchanges, to name just a few.

Market experts say the dramatic changes that have occurred in the equities world are about to repeat in other markets such as bonds, derivatives, commodities and currencies, where much business is still transacted over the telephone or via nonpublic electronic venues and where prices are not fully displayed. “High frequency trading is going to transform many once bespoke markets, just the way it changed equities,” says Ciamac Moallemi, associate professor of decision, risk and operations at Columbia’s Graduate School of Business.

Multiple forces are pushing high frequency trading deeper into new territory, and for reasons that are very different than those in the equity market, according to Patrick Whalen, head of buyside trading at AllianceBernstein. Whalen, a former Lehman trader, got his start in equities and now focuses on an array of asset classes. The growth of high-speed trading in the equity markets in the U.S. was driven by the Securities and Exchange Commission, which wanted to make sure that individual investors received the best execution for their orders. In the swaps market, the move to electronic trading is the result of regulations adopted after the financial crisis. The point is to control systemic risk.

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