Investment Banking Traders

The first stock markets as we know them today were founded in the 1500s in Europe. The Philadelphia Stock Exchange, now known as NASDAQ PHLX, is the oldest stock exchange in the United States. It was founded in 1790. The best-known exchange in the United States—the New York Stock Exchange (NYSE)—was founded soon thereafter in 1792. “As trading evolved, traders started acting as buyers and sellers, standing on crowded trading floors seeking to find the right counterparty in order to carry out a certain trade,” according to a short history of trading from technology consulting firm Capgemini. “Until as recently as the 1960s, financial information spread slowly, typically through ticker tapes. Trading was carried out almost entirely manually.”

Modern technology began to be incorporated into financial markets in the 1970s. In 1971, the National Association of Securities Dealers Automated Quotations was launched, becoming the world’s first electronic stock market. In 1976, the Designated Order Turnaround system was introduced in the NYSE, allowing the electronic trading of securities.

The most noteworthy development affecting the work of traders today has been the emergence of high-frequency trading, in which quantitative traders use sophisticated algorithmic computer models to trade stocks and other securities rapidly and take advantage of small changes in prices to earn healthy returns. In 2012, high-frequency trading firms accounted for 51 percent of all U.S. equity trading volume. Algorithmic trading—especially in high-volume markets such as fixed income and foreign exchange and equities—has increased trade volume for investment banks, but also reduced the number of traders needed and changed their job duties. “The once-rosy role of the trader—hustling, bustling, and raking in dough—is giving way to a new sort of financier: the technologist,” according to Fortune. “Automation, software, data analysis, and algorithms are taking the workplace by storm as financial firms seek ways to cut costs and manage increasingly dismal revenue results.”

Technology's impact on trading had intensified by the end of the decade. "Funds run by computers that follow rules set by humans account for 35% of America’s stockmarket, 60% of institutional equity assets and 60% of trading activity," reported The Economist in October 2019. "New artificial-intelligence programs are also writing their own investing rules, in ways their human masters only partly understand."