The financial market has grown tremendously over the past years. The growth has brought different technological changes that have seen various individuals participate in online share market trading. From the expenses, scams, and execution modes experienced in the 1300s, we can say that online stock trading has a new name worth celebrating.
Before you take anything for granted, reflect on the debt trading in the 1300s, stock trading in the 1600s, the south sea bubble in 1711, the Philadelphia stock exchange in 1790, the establishment of the NYSE in 1792, and bucket shops in the 1870s. This is enough to give you the skeleton of online stock trading and the strides made before the introduction of the ECN technology that added flesh and changed the whole game.
This article will go in-depth to inform you, as an inspired trader, the journey the financial market has passed through to date so you can appreciate what you are doing even more. Let us get started and know about:
- ECN Technology in 1969
- NASDAQ in 1971
- NAICO-NET in 1982
- Instinet in 1983
- Trade*Plus in 1985
- Etrade 1991
- TD Ameritrade in 1994
- Charles Schwab & Scottrade in 1996
- Day trading in 2000
- Online Stock Trading in 2022
ECN Technology in 1969
The age of computers. It revolutionized how trading was done, especially with the introduction of Electronic Communication Network (ECN) in 1969. As the name suggests, ECN matched up sellers and buyers interested in the real-time bid-ask data displayed. Companies made this easier by developing software that would automate trades using the ECN technology. A big step toward online share market trading.
NASDAQ in 1971
The National Association of Securities Dealers was one of these businesses to utilize the ECN. Soon after beginning as an electronic ticker display, they created software to build the first electronic stock market in history. The National Association of Securities Dealers Automated Quotations (NASDAQ) is how they refer to their product.
However, NASDAQ could not complete deals during the first several years without a human broker's assistance. The laboriously manual procedure required approximately 7 days to complete each deal. As a result, while some trades were started over the phone throughout the first ten years of the NASDAQ, most transactions still took place on the trading floor.
The well-known picture of a crowd of men in suits moving around while raising their hands and yelling out bids during trading on the exchange's floor is a result of this. However, there is a method to the seeming mayhem, with designated floor traders and a complex system of hand signals.
The floor was already beginning to be eclipsed by phone trading by the 1980s, and the internet effectively ended it in the 1990s. Technically, floor trading is still used for the most expensive equities, but time has passed. Even reputable newspapers, such as Market Watch, have stopped publishing images of the trading floor because they claim that the only commodities exchanged are "camera flashes, sound bites, and high-fives." A new, online means to trade stocks emerged at the turn of the century.
The NASDAQ had to change to survive around 2010, which contributed to the development of the technology required for the financial sector to start trading online. In reality, NASDAQ was at the forefront of a brand-new SOES system in 1987 that enabled inexperienced investors to participate in the fast-paced world of Wall Street. This was only a further development toward the current state of internet trade.
NAICO-NET in 1982
Most people were suspicious of operating without a reliable broker because of the history of bucket shops and other frauds. These brokers, though, weren't cheap. So the North American Holding Corp. established NAICO-NET as part of the answer to this issue.
NAICO-NET was initially solely utilized by industry insiders; however, not all brokers were impressed with this program. NAICO-NET could complete trade connections so fast that the spread—the difference between the offer and purchase prices—significantly decreased. Since the spread was where most brokers made their money, brokerage companies were not particularly interested in keeping the spread thin. The expense of maintaining NAICO-NET was also not a selling point. The cost of the software licensing was out of the question.
NAICO-NET successfully enhanced the general public's capacity to engage directly in the markets. Since there is now always-on account access, you can look at stock histories whenever you want. Additionally, you might effortlessly take part in submitting foreign trades. People who used this trading platform from their homes were using it to avoid paying expensive brokerage fees. It was no longer necessarily required to use a broker. In the end, only relatively rich people could participate in this fashion due to the program's cost.
NAICO-NET, however, solely offered commerce connections. Without someone at their headquarters completing the formal trade, it could not accomplish them.
Instinet in 1983
Keep in mind that trade used to move quite slowly for many years. Buyers and sellers had to be matched by brokers, and the accompanying paperwork may take up to a week to process.
This would alter when 1967-founded Instinet modified its marketing approach. For many years, Instinet possessed the necessary technology to conduct all transactions electronically. In actuality, it was also the nation's oldest ECN. Large national and international banks purchased the company's computerized transaction system and utilized it almost entirely to purchase investments rather than sell them. The corporation didn't start going after brokers to exploit the sell-side until a new CEO joined the team in 1983. When both parts were combined, the network erupted, with business users eager to complete transactions more quickly.
Trade*Plus in 1985
The first customer-focused internet trading program was called Trade*Plus. The lucrative market became obvious when more Americans bought PCs with Internet connections. Initially, the firm provided its services to brokerage companies. In 1991, E*Trade, a consumer-oriented counterpart, was split out. Despite the high transaction costs, it was cheaper and directly competed with NAICO-NET.
Etrade, established in 1991, continues to rank among the most well-known online stock trading firms. This is because they immediately became the American business with the quickest growth. As internet trading expanded in popularity among Americans and became a more common home practice, the percentage of people participating in the stock market rose by 15%.
TD Ameritrade in 1994
TD Ameritrade is a well-known brand. They started by making acquisitions, and they're still doing it now, which has helped them grow into one of the biggest online brokerage companies.
Charles Schwab & Scottrade in 1996
The traditional brokerage and banking firm Charles Schwab registered its one-millionth online account within a year of joining the internet stock trading industry. Its client assets were close to $500 billion.
They didn't provide internet trading for another two years. With costs as low as $7 per trade, Scottrade was a component of the client-focused pricing system. This clever decision started a trend of more affordable internet trading expenses.
Day trading in 2000
From 12 internet brokerage businesses in 1994 to 140 firms in 2001, the 21st century saw the peak of this fast development. The increasing competition brought about more user-friendly interfaces, quicker trading, reduced costs, and new features. As a result, dedicating one's entire day to internet trading became practical in the late 1990s and has since gained popularity.
Online Stock Trading in 2022
The development of technology in stock trading has been rapid and consistently groundbreaking for decades. Nevertheless, development has slowed during the last 22 years.
You can undoubtedly determine that today's well-known brands are the same ones that debuted in the 1990s. Although the process is getting faster and we have new capabilities like the ability to trade from smartphones and tablets, there haven't been many developments that have completely changed the market.