Technologies that are Significantly Driving Digitalization in Trading Space

Samrat Pradhan (Correspondent) | Tuesday, 18 August 2020, 11:38 IST

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Technologies that are Significantly Driving Digitalization in Trading Space

The Financial Market is facing a significant transformation due to the advancements in various next-generation technologies today where new trends are driving digitalization in the trading segment. 

 

As an alternative to the traditional stock exchanges, the increase of multilateral trading facilities (MTF) has generated an important competition with the existing Stock Exchanges in the financial market.

Today, stock exchanges are getting together and have been merging to ensure better asset distribution and most importantly cost efficiency. This fusion is completely attributed to the formation of new trends due to the various technological innovations taking place across the world.

With just a few exceptions,  every European stock exchange is concentrated in one of the four most important stock groups: NASDAQ-OMX, Deutsche Börse, London Stock Exchange (LSE), and Euronext.

To give you a perfect example of the fusions between stock exchanges is Euronext which is composed of the main stock exchange of Europe which includes Amsterdam, Paris, Dublin, Brussels and Lisbon, which together has formed the largest European stock exchange operator. 

Trading was mainly done through emails and phones if we look back a few years from now, where interaction among the parties were direct, prices were written on paper, and information was stored in spreadsheets. However, with the digitalization in the capital markets, the name of Electronification is the current financial jargon;  numerous platforms are being developed where one can start trading efficiently  and cost-effectively.  

Nowadays, technologies are present at every stage of the trade lifecycle. Technologies have been enabling the trading process to be as efficient as possible and accessible to everyone around the globe.   

Here are three technologies which will play  a vital role in  guaranteeing the efficiency of the operations:

Blockchain and Smart Contracts

Blockchain technology and smart contracts are the most vital technologies which have been the main factors in the digitalization of capital markets today. Smart Contract has been especially designed to reduce the parties that are involved in the transactions and also reduce the length of the process which will lead to saving a tremendous amount of time and most importantly, the money. 

Without the presence of a third-party in charge of the legal paperwork, it provides an automated contractual relation between parties.  As both receive the same information since it’s a direct communication, the smart contracts ensure trust between parties.  And,  since everything is made through the platform,  it also decreases the risk of document falsification. 

Furthermore, the security tokens are becoming more and more popular with the utilisation of smart contracts and blockchain technology. Eventually, it will rapidly increase the capital markets digitalization process as It will have tremendous advantages which will  drive  people’s interest.  

Digital Ledger Technology (DLT)

Blockchain integrated with DLT will ensure protection from risks of hacking and  offer better transparency as well.  For instance, if we talk about ensuring better transparency, both this technology are kept in a decentralised database which will be managed by numerous participants. However, as it is in a nascent stage, there is still a little amount of doubt among the people when it comes to storing the valuable information in this new technologies. 





 

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