Emerging Technologies and the Transformation of Exchange Trading Platforms

Abstract

The authors examine technology’s current and future influence on trading and the structure of markets. Order processing speeds and new algorithmic tools have driven market volumes up well beyond projections. At the same time, some high-profile technology developments have failed, and legacy practices based on dealer intermediation and telephone trading have proven resilient. Looking to the future of exchanges, we examine today’s pressures for changes. We propose that three emerging technologies will create new market structures and disrupt market providers and incumbent firms that offer market data and posttrade services to market participants: (1) algorithmic trust technology, (2) formative artificial intelligence, and (3) autonomous decentralized organizations (DAOs) and their associated webs of smart contracts that could perform financial markets functions.