University of Minnesota - UMN Executive Leadership Insights
Information Technology and Financial Markets
Chapter

Information Technology and Financial Markets

Risk, Volatility and the Quants

Donald Crooks, John Slayton and John Burbridge
In: Information Technology for Global Financial Markets: Emerging Development and Effects
IGI Global, 2012
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Editorial Rating

6

Qualities

  • Analytical
  • Overview
  • Background

Recommendation

Professors Donald Crooks, John Slayton and John Burbridge provide an academic overview of the impact of information and communication technologies (ICT) and quantitative techniques on financial markets. Because they cover so much historical and technological detail in a brief report, they do not address any particular aspect in depth or with particular rigor. That said, this overview does touch on salient points in the development of Wall Street and electronic trading, and puts the ICT revolution in its proper context. getAbstract suggests this pocket history to financial executives and managers, business students who want an introduction to the impact of ICT on markets, and those interested in the past saga and future prospects of securities trading.

Summary

Bad News Travels Fast

Information and communication technologies (ICT) ensure that today’s financial markets are global and interconnected. Financial markets never react well to bad news, and ICT accentuates the negative effects of bad-news incidents – ranging from the 1990s Asian crisis to the “flash crash” of 2010 – because financial markets are so closely intertwined. A financial crisis anywhere can lead to severe disruptions elsewhere.

Historical Foundations

In 1792, 24 men signed the Buttonwood Agreement, setting up the New York Stock Exchange (NYSE). Its first applications of information technology were the stock ticker in 1867 and the telephone in 1878. The NYSE suffered a major setback during the Great Depression. Share trading volumes of did not return to 1929 levels until the 1960s. The NYSE’s reliance on physical stock share certificates constrained business. Due to excessive paper work, the NYSE once had to limit trading from 10 a.m. to 2 p.m. just four days a week. As trading increased in the 1970s, the NYSE upgraded its systems and digitized shares. Over the next decades, competing exchanges emerged, linked up and increased their computerization...

About the Authors

John Slayton is a principal of The Trust Company of the South and an adjunct assistant professor of finance at Elon University, North Carolina, where John Burbridge is a professor of operations and supply chain management. Donald Crooks is an associate professor at Wagner College.

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