5 Things CIOs Gain from Automated Trading Systems

5 Things CIOs Gain from Automated Trading Systems

By Capital Markets CIO Outlook | Friday, October 18, 2019

Automated Trading SystemSpeed and efficiency offered by automated trading systems are increasingly catching CIOs' attention. Here's more to it.  

FREMONT, CA: Automated trading systems are increasingly gaining popularity among capital market firms. The system uses artificial Intelligence algorithms to oversee trading processes. The primary advantage of an automated trading system is that it focuses strictly on the criteria and conditions as specified by the trader and offers a higher level of transparency in the trading processes. Automated trading also allows traders to process large orders faster, thereby reducing processing adversaries. Almost 75 percent of shares on the U. S. stock exchanges are traded via automated trading systems.

With the digitization of the trading processes, CIOs are also benefiting significantly from the automated trading system. It isn’t surprising that, increasingly, CIOs are getting attracted to the idea of an automated trading system for trade purposes. While some trading platforms offer strategy-building options too, traders looking for customized trading rules consult the CIOs to modify those strategies. CIOs, on the other hand, benefit significantly from these automated systems. They allow the CIOs to automate many of the previously manual or semi-automated trade operations. Here are the primary ways in which automated trading systems assist capital markets.

• Eliminates the Emotional Factor

Conventionally, the traders were very much involved in the details of trading processes. They were often over engaged in the trading details, seeking to utilize every opportunity of buying and selling. Testing situations in trading were especially tempting for the traders as they ended up making decisions that were based purely on their emotions. Thus, there were always risks of losses due to overtrading. However, with automated trading systems, the traders can relax as the automated system opens and closes trades based on the predefined strategies, thereby eliminating the emotional factor from the trading processes. 

• Testing Trading Strategies

Before using a strategy for trading in the real market, CIOs can assess the viability of a particular strategy by testing the strategy on the past trading solution providersdata. However, it is important on the traders' part to consider only the relevant data sets that will be relevant to the market space targeted by the trader. Moreover, the traders can also improve their strategies depending upon the feedbacks or insights gained from testing their strategies on past data. Such a setup significantly reduces the risk factor for CIOs.

• Maintaining Trade Consistency

A strategy cannot be 100 percent accurate. In case of a semi-automatic trading system, a trader incurring a loss due to a particular strategy would often discourage the IT teams against using such a strategy in the future. There was also a possibility that the strategy could have worked with amazing outcomes in the next trading. However, walking by the rules would have demanded the trader to have faith in the strategy. Such a psychological factor that often guides a trader's decision can be eliminated by incorporating an automated trading system, that makes a decision based on the strategies provided by the IT teams.

• Enhanced Order Entry Management

An automated trading system allows the CIOs to ensure quick and easy defined trade entries as it reacts immediately to the changing market conditions. Order entry speed is an important aspect of trading in the dynamic market space as it can be a difference between a huge gain and a big loss. With automated trading systems, all the orders are automatically created, depending on the market requirement.

• Trade Diversification

CIOs can actualize diverse or mixed strategies through an automated system. An automated trading system works on a set of rules. The rules can be customized by incorporating a set of strategies as specified by the trader. Diversification allows the traders to distribute risk factors across the various trade instruments.

Thus, automated trading systems can be an invaluable asset for the CIOs involved in trading processes. Automated trading systems hold the key to success in the highly dynamic market for the traders while it promises efficiency to the CIOs.

 

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