The Impact Of Information Technology On The Stock Market

Introduction:

The world today has evolved from and continues to be subject to several rapid and transformational technological advancements and developments. Most changes which have been experienced by developed economies can be traced to growth in Information and Communications Technology, concentrically known as Information Technology or IT (Castells, 1999). From education, health, and entertainment to government and economics, these multi-dimensional developments, resulting from the increasing use of IT, have been observed in many different areas of human life. Similarly, it can be observed that Information Technology has weaved a large web of influence all over the world when it comes to progress in Finance and Economics. IT has become

The impact of IT in this area can be evaluated starting from the advent of centralized computing and the use of computers to run the market (Hobjin and Jovanovic, 2000). A large number of high speed computers have now completely transformed the jobs of brokers. The use of computers has drastically increased the speed and efficiency of stock market trading. This is not how far the use of computers extends in the industry. Developments in communications have led to the creation of ‘electronic trading’ or e-trading. Electronic trading refers to the exchange or trading of securities electronically. Buyers and sellers are brought together or connected over an ‘electronic trading platform’ with the help of Information Technology (Stoll, 2008). E-trading erodes the limitations on investment opportunities which had originally resulted due to time and space. It suggests that trading can take place in cyberspace that is anywhere and at anytime. This revolutionary development has allowed stocks to be traded in an enormous global market with countless opportunities for businesses as well as

Securities trading can be considered as a highly ‘information-intensive’ sector of an economy. In the United States for instance, over twenty-percent of a firm’s average spending is outlaid on information systems. The paper essentially is based on the notion that, “everything depends on the information technology today, and the speed and accessibility of that information is paramount”. It studies the role of information technology in securities trading, and focuses on the best trading strategies or policies and decisions for investment in IT for traders that are competing to take advantage from new information. One of the most important influences of IT is that it decreases the time which is needed for the processing of information at all levels of the trading process. ‘Information processing delays’, which basically refers to the time needed to attain, process, and act on new information about the security, is a key determinant of trader behavior. A trader can reduce information processing delays by incorporating suitable investments in IT. Traders who are able to observe the need and availability of ‘timeliness improving technologies’ and therefore invest more in information technologies that help reduce