Still, the process of change is complex and its progress uneven. Consider, as we do in this month’s issue, the activity of equity trading, where technological advances are rapidly enabling machines to replace many, if not yet all, humans. This development has been decades in coming; the very name “Nasdaq” (the “aq” stands for “automated quotation”) was meant to conjure the power of technology to modernize the over-the-counter marketplace. In truth, much technology was ready before the folks at Nasdaq were ready to use it. As a result, as Senior Editor Justin Schack points out in “Nasdaq Battles Back” (page 54), the OTC market found itself outstripped by the more tech-savvy and aggressive electronic communications networks that arose in the late 1990s.
Institutional investors, lulled by the phenomenal gains they made throughout the bull market, were also late to embrace the power of technology in trading. Once the bubble popped, they turned their attention to maximizing their returns in any way possible. Increasingly, that has meant a withering focus on trading costs and with it a demand for ever-more-sophisticated technological support.
With institutions asserting themselves in this area, we thought this an opportune time to ask them which firms, markets and other trading venues have been giving them the best service. Our inaugural ranking of the best in equity trading can be found on page 77. The results reflect the opinions of executives -- most often head traders -- of 350 institutions worldwide.
Pleasing these increasingly demanding clients is of critical importance for Wall Street brokerage firms and exchanges. As Schack, who has written often about the trading world over the past eight years, notes: “Investors no longer look at trading as some unknown realm that only skilled brokerage and exchange personnel can navigate. They’re more knowledgeable and sophisticated than ever about trading, and that’s putting immense pressure on all intermediaries to quickly become more efficient or cease to exist.”
That’s as good a reason as any to change.
