Equity Trading Technology

CalibratedConfidence's picture

John O'Hara is the managing director and co-founder of Taskize, a financial consulting group out of the UK.    They have released a 20-page document on the technology behind an equity trade.  In today's complex and fragmented market structure with 13 lit exchanges all using their own RLP's and internalizers to take advantage of low volume clients and front run the high volume ones, it can be confusing to follow the flow of your trade through the vacuum tubes and over the brokers internalizer to the exchange matching engine. 

And who has the most popular path for trade executions?  Not surprisingly, NYSE leads the global exchange group in Largest Value of Trades at $13 trillion while Indian NSE (the same one with the freak trade that set off price gyrations) takes the cake for Volume with 1.4 trillion trades... no surprise given the push by HFT into unregulated, emerging markets. 

Given the complexity of our system just to execute a trade, is it any wonder that CNBC has been on a push with Mila Kunis and Rachael Fox to bring back the seemingly low-brow retail investor who only gets into the market once his favorite TV actress says so?  As TV panders to the simple minded, the people who make financial market interaction their lifes work, have been busy creating a complex web of technology designed to help the creators and hurt the general public users.  How many Mom and Pop Scottrade/e*traders understand the trading schematics?

We start with:

 

and before you know it, the complexity grows to an unmanageable size:

 

Good luck human.

John OHara - The Technology Behind An Equity Trade