Electronic trading and its implications for financial systems

The adoption of electronic trading systems has transformed the economic landscape of trading venues and is proving a force for change in market architecture and consequential trading possibilities.1 Electronic trading both removes geographical restraints and allows continuous multilateral interaction (whereas telephone trading allows only the former and floor trading only the latter). It allows much higher volumes of trades to be handled, and in customized ways that until recently would have been technically impossible or prohibitively expensive. This paper considers areas where these enabling effects have been particularly important in wholesale financial markets and how they raise wider policy implications.