Computerization of the Equity, Foreign Exchange, Derivatives, and Fixed‐Income Markets

Date01 May 2014
AuthorIvalina Kalcheva,Jia Hao,Yung‐Yu Ma,Laura Cardella
Published date01 May 2014
DOIhttp://doi.org/10.1111/fire.12033
The Financial Review 49 (2014) 231–243
Computerization of the Equity, Foreign
Exchange, Derivatives, and Fixed-Income
Markets
Laura Cardella
TexasTech University
Jia Hao
Wayne State University
Ivalina Kalcheva
University of Arizona
Yung-Yu Ma
Lehigh University
Abstract
Wesurvey empirical studies on the development and effects of increased computerization
across equity, foreign exchange, derivatives, and fixed-income markets. While the changes in
the trading process due to computerization in less liquid markets such as the corporate bond
market have been modest, there have been dramatic changes in certain derivatives markets,
foreign exchange, and particularly in equity markets. In many instances, previous research
has found positive effects of computerization on measures of market quality, but our survey
highlights that human intermediation is still prominent and beneficial in certain areas.
Keywords: automation, electronic trading, computerized trading, human intermediation
JEL Classifications:G1,G2
Corresponding author: University of Arizona, Eller Collegeof Management, P.O. Box 210108, Tucson,
AZ 85721; Phone: (520) 621-0747; Fax: (520) 621-1261; E-mail: kalcheva@arizona.edu.
Wethank Michael Goldstein (special issue guest editor) and an anonymous referee for helpful comments.
C2014The Eastern Finance Association 231

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