Capital Markets and a brief history of New York Stock Exchange (NYSE) and NASDAQ

Capital Markets and a brief history of New York Stock Exchange (NYSE) and NASDAQ and what are technical analysis

Capital Markets and a brief history of New York Stock Exchange (NYSE) and NASDAQ and what are technical analysis

Technology has fueled global growth in the last decade, encouraging the dream of creating a single universal market. However, investors who have diversified their portfolios across borders, using new products, do not always know how their orders are handled on a multitude of scholarships and financial centers around the world.

The regulations and trading technologies used vary significantly not only from one country to another, but often even from one scholarship to another. Regulations also change frequently as stock exchanges evolve from the status of companies owned by stock market members to increasingly competitive companies.

Stockmaxim, which provides direct access to more than 90 markets and financial centers in the world, has incorporated these different stock exchange rules into its SMART-routing technology to ensure that customers get the best execution regardless of the traded product or execution venue.

The activity of the scholarships has been uniform, due to the growing competition and the consolidation trend inherent in a service sector. Some scholarships have evolved and turned into commercial companies that are trying to generate profit, and some of them have become tradable. Other scholarships have merged to compete more effectively in this area where innovation requires substantial investment.

US scholarships also face important regulatory challenges, given the concern of the Securities and Exchange Commission for crucial reforms to modernize US capital markets in the 21st century.

The proposed NMS regulations focus on the benefits of electronic trading and most likely are forcing stock exchanges where the stock market is still working to change its model to remain competitive. In anticipation of the changes, the New York Stock Exchange has already submitted a proposal for a new hybrid model.

An even greater challenge can come from the SEC concept of self-regulated organizations. It questions the “opportunity to implement improvements to the current SRO system or to seek an alternative regulatory model,” which could lead to only one independent regulator without any relationship with stock markets. Without regulation, stock exchanges would only become a business that would fight for customers.

Stockmaxim tracked the start of trading and its developments in major venues that its universal platform accesses through broadband communications networks to trade stocks, exchange-traded-funds (ETFs), options, futures, forex, and bonds. Using a universal trading platform, Stockmaxim offers a gateway to global markets as well as multiple products using a single account in one currency.

History of NYSE

The exchanges have been part of the American economy and history since the 18th century.

In 1790, Philadelphia traders, who helped finance the Independence War, contributed to the creation of the first US stock exchange to trade the federal government’s $ 80 million debt.

Prominent by the speculative boom that was to come from it, 24 traders gathered Wall Street (68) in 1792 and signed the Buttonwood Tree agreement marking the founding of the New York Stock Exchange. The agreement was aimed at regulating warrants trading fees issued by the US government and two banks. One of these, the Bank of New York, is still listed on the NYSE today.

The event that was to form the trading on the world’s biggest stock exchange was in 1875 when NYSE broker James Boyd hit the ground. Lacking his mobility to move through the crowd of buyers and sellers, Boyd stayed in one place and dealt with a single action, Western Union. Customers quickly realized that it is more convenient to always trade the same action from the same place, leading to the creation of a specialized system where demand and offer agree after an auction process.

Today, much of the NYSE order flow is also done through a broker from the stock market that acts as brokerage agent agents, bringing buy or sell orders to the “specialist post”. Brokers in the stock exchange, if working for a firm, can also represent orders for their own account. Independent brokers in the stock market do the same job, except that they do not work for a specific firm, but only help with the handling of orders.

From his post, the specialist deals with the auction process, relying on his exclusive knowledge of buy and sell orders placed in his book by brokers in the stock market. Sometimes, even the specialist is the buyer or seller as the last solution, committing his firm’s capital to restore order in the market.

Nevertheless, the specialist should never use the privileged information contained in the register to get priority in trading, when a mating between buy and sell orders can be done.

In the past, NYSE specialists abused their privileged positions and took advantage of clients, leading to an agreement with the SEC in early 2004. This prompted the SEC to consider extensive market reforms to align the US regulatory framework to the advance new trading technologies.

Competition from efficient e-commerce has also intensified. As such, NYSE is proposing a new hybrid market model that offers the certainty of execution for investors who choose that model or the opportunity for a better price for others. The Scholarship also considers diversifying the product offer.

But without waiting for these recent developments, NYSE has progressively upgraded its market. Orders are delivered electronically to NYSE through SuperDot, an order routing system that delivers orders directly to the trading post, and electronically sends to member firms that have initiated orders for post-trading reports.

NYSE e-Broker is an example of using technology in such an environment. The wireless order management application keeps brokers in the stock exchange in direct contact with the trading departments of the firms they represent as well as the other participants in the stock market.

Electronic trading accounts for about 50% of the NYSE volume. Interactive Brokers, a pioneer in the use of trading technology, is consistently ranked among the top 15 firms on the stock market that use electronic trading.

Anonymous SuperDot (Adot) allows institutional investors to place orders directly to NYSE without any participant knowing their identity. Institutions and brokers involved must set trading limits.

Certain orders sent to NYSE can be automatically executed through the Direct + platform, which currently cover about 10% of the exchange volume. Direct + has been designed for small retail orders of up to 1099 shares and has some limitations, such as 30-second intervals between consecutive orders.

NYSE now proposes to increase the Direct + functionality by eliminating all size and interval bans to support its hybrid model. This will have a major impact on the NYSE market structure and will affect not only the specialists and brokers in the stock market but also the global financial industry.

Memberships may also be traded during 4 after-hours trading hours between 4:15 pm and 6:30 pm in the Off-Hours Trading Facility (OFHT).

The NYSE electronic data market services include the NYSE Open Book, a real time limit order register that displays the aggregate volume for each price for each NYSE share. Liquidity Quote provides a single price for the cumulative number of shares for larger orders in the limit orders register, keeping the quotes at price.

In addition to developing a hybrid model, John Thain, CEO of NYSE, outlined plans to diversify the products offered. NYSE, which is currently trading at options, could offer derivatives and is expected to expand its existing offer of government and corporate bonds that are traded electronically on its Automated Bond System or ABS platform.

Another NYSE innovation could be expanding the trading program to make it easier for participants in Europe to access.

History of NASDAQ

NASDAQ may become the stock exchange at the end of this year, a status for which the electronic stock market pioneer applied in 2000 but whose approval was delayed due to some questions about the complex market structure and regulatory reforms.

An important change may be the expansion of the trading rule through price breaks or the “best price” rule for NASDAQ listed issues that are currently traded through the best execution between broker and dealer.

From its modest debut in 1971 through its NASD automated bidding system for over-the-counter (OTC) trading, NASDAQ owed much of its regulatory and congressional development to the right to trade outside of stock exchanges.

However, the legislature and regulatory authorities wanted transparency and fair access to the OTC market, which led to the emergence of NASDAQ, which in the last three decades has launched several trading platforms: Small Order Execution System called SOES, SuperSOES, SelectNet, and SuperMontage.

Today, NASDAQ’s largest capacity is the Market Center, an environment conducive to trading stocks listed on the NASDAQ or the New York Stock Exchange. The Market Center is also a trading center for popular ETFs, such as the QQQQ, which tracks the Nasdaq-100 index, or other listed ETFs on the American Stock Exchange.

The open model of the NASDAQ Market Center offers:

  • A display of the fully integrated order, as well as transaction execution and reporting
  • Possibility for market participants to enter as many orders as they want at different price levels
  • Automatic trading and clearing system
  • With the purchase of ECN’s Gross in September 2004, NASDAQ has also added smart-routing capabilities
  • A variety of order types, such as pegged or fill-or-return
  • A multitude of market participants’ identities
  • Opening Cross and Closing Cross, or electronic auctions that execute all parts of a single share at a single price
  • Multiple connectivity options, including FIX, private network, CTICI or NASDAQ WorkStation II

A landmark market in NASDAQ history was the Order Handling Regulation of the SEC in 1996, which led to the development of ECNs. In order to rise to the technological level of competitors, NASDAQ has recently adopted some ECN features and lowered its fees.

Technical analysis is the research of market dynamics, which is mainly done with the help of graphs, in order to predict future price movements. Technical analysis involves several approaches to studying the price movements that are interconnected within a harmonic theory. This type of analysis follows the price movement in the market by analyzing three market factors: price, volume and, in the case of the study of the futures market, the open interest displayed (the number of open positions). Of the three factors, the most important is the price, while the changes of the other factors are mainly studied to confirm the correctness of the identified trend. This technical theory, like any other theory, has its basic principles.

What is technical analysis?

Technical analysts base their research on the following three axioms:

Market movement takes everything into consideration

This is the most important principle of technical analysis. It is essential to understand it in order to understand correctly how the technical analysis works. Its essence is that any factor that influences the price of financial instruments be it economic, political or psychological, has already been considered and reflected in the price chart. In other words, any price change is accompanied by changes in external factors. The main influence of this premise lies in the need to closely monitor price movements and analyze them. By analyzing the price charts and using a multitude of other indicators, a technical analyst reaches the moment the market itself shows the trend it is most likely to follow.

This premise comes in conflict with the fundamental analysis in which the focus is mainly on the study of the factors, and then, after the analysis of the factors, on the conclusions regarding the formation of the market trends. So if demand is higher than supply, an analyst on the ground will come to the conclusion that the price will increase. On the other hand, using the technical analysis, an analyst draws the opposite conclusions: since the price has risen, the demand is higher than the supply.

Prices move in the direction of the trend This hypothesis is the basis of all the technical analysis methods, since a market that moves in the direction of the trend can be analyzed, unlike a chaotic market. The premise that the price movement is the result of a trend has two effects. The former suggests that the current trend is most likely to continue and will not reverse, thus excluding a disorderly and chaotic market movement. The second one assumes that the current trend will continue until a trend in the reverse direction is installed.

History Repeats

Technical analysis and market dynamics studies are closely linked to the study of human psychology. Consequently, price charts identified and classified in the last centuries describe basic features of the psychological state of the market. First, it displays the current market stances, whether they are rising or falling. Since these models worked in the past, we have reason to believe that will work in the future, because it is based on human psychology has remained almost unchanged over the years. We can reformulate the last premise – history is repeated – in a slightly different way: understanding the future lies in studying the past.

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