The top 5 reasons people give for why they love to trade in today’s equity markets, by José Penalva

The top 5 reasons people give for why they love to trade in today’s equity markets, by José Penalva

1. Cheap Trading
Markets have come a long way from the time of trading in 1/8ths and 1/16ths. Spreads have come down enormously and many shares now trade a few cents apart. There has never been a better time to execute a trade quickly and cheaply.

2. Build your own Order Types
With the increased automation and technological upgrading of exchanges and trading engines, we have seen a rapid growth in order types. This facilitates algo design because you can code trading strategies quickly and in the most efficient way using the exchange’s own optimised routines built into the order types.

3. Fair Markets
People love that you don’t need to go through some broker at the exchange who’ll take your trade at his leisure and under his terms. Anyone can colocate and have direct access to the exchange’s trading engine knowing that the server you’re using is connected by the same length cable as everyone else there, and shorter than anyone outside!

4. Competition between Exchanges
Now, who doesn’t love competition! Exchanges fighting for order flow have created an environment with lower fees and a variety of fee structures where you are sure to find the one that suits you best.

5. Better Prices
With so much competition and such high-tech trading, you are sure to know that whatever price you get, truly reflects the state of the market, and not only the market in the asset you’re trading in, but it will reflect what’s going on in the options market, the market for related shares, and even FX or commodity markets if they matter.

Disclaimer: This list is intentionally one-sided and somewhat exaggerated. It is intended for discussion purposes and should be viewed together with the accompanying list: The top 5 reasons people give for why they hate to trade in today’s equity markets

José Penalva is Associate Professor at UC3M and co-author of Algorithmic and High-Frequency trading.

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