Chapter 11: Online Trading: Part I

This chapter discusses the evolution of online trading, its application in various market structures, and its benefits and potential concerns. Computers were first used in electronic communication networks among brokers and dealers to make trades and for informational purposes. Online brokers became popular with retail investors as the internet spread. Online trading comes with various trading protocols and order types. It enables traders to automate trading decisions and process data more easily using charting tools and customized programs connected to the broker's infrastructure. Electronic trading allows for greater centralization but can also be accompanied by market fragmentation. Market regulation has affected market structure and is still evolving. Centralization allows for more competitive prices and reduces search costs. Decentralized markets could cope better with asymmetric information.