Electronic exchanges that permit trading have proliferated on the Internet and World Wide Web. E*Trade, Ameritrade, Datek Online and other electronic exchanges offer investors the ability to invest their money electronically in stocks, bonds, commodities, and futures. The electronic revolution in shareholding and investing has already allowed layman and professional investors to make inexpensive, speedy trades day or night. In addition, these electronic exchanges offer to potential investors the same inside information available to professionals. Yet, despite stories of overnight success where hundreds of dollars have been turned into hundreds of thousands of dollars, there are many risks and pitfalls that await the unwary investor who is new to electronic trading. For example, many investors may be surprised to discover that getting the cheapest commission does not guarantee them the cheapest trade or that how their order is traded after they invest can significantly effect price. As Barbara Roper of the Consumer Federation of America warns “The typical investor doesn’t have a clue that he may be losing money based on how his trade is executed” (Smith 1).
This analysis will look at the growing phenomenon of electronic trading via the Internet and Web, including the advantages and disadvantages of electronic trading for potential investors. A conclusion will address the possible direction electronic trading will take in future.
Electronic exchanges are popular with investors because they permit easier access to trading, more efficient methods of trading, and a reliable and accurate means of tracking investments from anywhere in the world at any time. Yet, there are also cons to electronic investing, including technological difficulties and failures and slower response times than some exchanges are able to offer. Still, online or electronic investing is a phenomenon that continues to grow rapidly among potential i...