The Persisting Human Element of the Electronic Trading Habit

The Persisting Human Element of the Electronic Trading Habit

Roger F.A. van Daalen (Lancaster University Management School, UK)
DOI: 10.4018/978-1-61350-162-7.ch011
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The move towards electronic trading was believed by some to narrow the scope of information available to traders, due to the difference between the old paper-based and new IT-enhanced work environment. It was expected that a trader’s job performance would transform from a physical, social, embodied experience, into an individualized, rational, and detached operation. In this chapter, we discuss how the human element to trading has remained central to job performance, by illustrating how particular trading companies have excelled under the new job environment. Drawing on a data collected on electronic trading firms between mid-2007 to late 2010, we focus on a smaller set to illustrate our findings. We find that trading has remained a human endeavor; traders group together for learning and coordination benefits. Furthermore, firms now tap into a global talent pool, and have incorporated monitoring benefits made possible by electronic monitoring of positions for better risk management.
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Transitioning To Electronic Trading

It has been speculated that in paper trading, as opposed to electronic trading, that traders constitute the market by directly watching each other. In the physical paper trading setting, market participants emulate each others’ behaviours by observing trading habits of the successful traders, and similarly examined the failing strategies of others in order to exploit their weaknesses for profit (Zaloom, 2004). In this set-up, the trading pit is the material technology which through its shape becomes the focal point of trading, by directing traders’ information gathering, and price discovery. Because of the orderly and routinized way in which this set-up shapes trading in the pit, it was already considered a technology (Zaloom, 2003).

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