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The Early Days Of Online Trading

By Expert Author: mark vince

The popular image of stock markets is that of crowds of brokers shouting over the phone about selling or buying assets or making other types of investments. Nowadays, such practices continue to go on, but they no longer represent the norm. What has triggered the change in how investments are made on the stock market is something peculiar called Online Trading.

The early days of online trading can be traced back to 1969 when the first ever digital trading system was inaugurated. The system was called Electronic Communications Network (ECN) and was mainly used to display bids for investments or the prices of certain assets. The issue with these ECNs was that they were isolated networks pertaining to individual brokerages, thus limiting the interaction of different companies and the ease with which investments were made or assets transacted.

Fast forward to the late 1980s. By this time, online trading was beginning to take its roots and the pioneers of this new invention were a couple of brokerage companies which foresaw the potential of adding an internet gateway to the process of transacting assets and making investments. Their reasoning was that by incorporating internet accessibility to ECNs, the number of investments would grow exponentially, hence the creation of online trading. Such pioneers of online trading therefore started investing in software development companies that could facilitate the transaction of assets online.

By 1982, the first electronic trading system that could enable users to transact assets came online. The company that created it was called North American Holding Corp. and it can be argued that they were the ones to set the cornerstone for what would represent online trading. Their system enabled IBM users to connect via an application and, given the ease of usability, became a particularly interesting option for making investments.

Nevertheless, during the next decade, the classic method of transacting assets still endured as the costs involved in online trading were still generally high.

By the mid 1990s though, as internet accessibility grew, online trading became the hot ticket and more than 20% of Americans began making investments within the online environment. This comes in stark contrast to the decade before, when only 5% were transacting assets. This rise is also reflected in the income numbers of E*Trade, one of the major players of those times in online trading. From a measly revenue of 850.000$ in 1992, the company grew to 11$million, all thanks to online trading. Moreover, the number of brokerages making investments online or trading assets also grew from 12 in 1994 to 140 in 2000. And the rest is simply history.

Nowadays, one would think that, given the possibility of transacting assets online, the role of brokers is no longer important. Well, that is not the case. The fact that virtually anyone can make investments online, while not necessarily holding a large amount of knowledge over the field, has only intensified the need of professional brokers. Add to this the fact that online brokers usually charge smaller fees and commission than your traditional broker and you can understand why online trading has become so popular. In spite of the ongoing economic crisis, the online environment still presents an upward trend over investments and assets being transacted.

Mark Vince is a copywriter for more than 5 years. He love pets and take special interest to write on pet products, and insurance policies. In this article, he speaks about history of online trading from where the concept of investment first started.

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