Market Trends of E-Brokerages Industry
Zero commission in United States equity markets change market dynamics
United States Securities Acts Amendments of 1975 ended fixed trade commissions. Since then the equity commissions have been on a downward trend for both institutional and retail clients. This culminated in zero-commission trading for retail investors in the United States. For a few years, the mobile app-based brokerage Robinhood Markets Inc. has offered free trades and a USD 0 minimum balance to draw in millennial investors. And big financial-services companies have been cranking out other kinds of free offers. Fidelity Investments Inc. initiated index funds with zero fees, and JPMorgan Chase & Co. rolled out a service that offered clients 100 commission-free stock and ETF trades in their first year.
Brokerages also make money by catering to investment advisers, loaning customers cash to buy stocks on margin, and lending out securities to short sellers hoping to profit on a decline in prices. One of the greatest sources of revenue for brokers is to invest or loan out the money clients don't have in play in the market which is put into banking subsidiaries of brokerage houses. The revenue loss from implementing zero-commission can be covered by the surge in customer base. The revenue breakup of a few major brokerage houses indicates the hidden potential of such other sources of revenue for brokers.
Online Trading Platform is driving the growth of the market
The development of technology plays a crucial role in the development of the global online trading platform market. Digital technology is advancing at a rapid pace, and online trading platforms have actually developed in terms of sophistication, usability and feature richness. In addition, improvements in internet connectivity, mobile technology, and trading software are providing the market profitable development opportunities.
The demand for customized trading platforms is expected to grow as end-users, including government and non-profit banks, increase their demand for customized trading solutions. ETPs can make a significant contribution to the growth of government securities markets at times when trading volumes have reached or are on track to reach a certain minimum critical mass.
The industry is expanding as trading platforms are increasingly adopting blockchain and artificial intelligence technologies to improve their accuracy and efficiency. The combination of automation, algorithms, and high-fidelity trading has also been driven by increasing trends in electronic trading, which aims to simplify the trade execution, improve efficiency, and enable advanced trading strategies, thus supporting market development.
Empirica introduced its trading algorithm called Volume-Weighted Average Price (VWAP). It is capable of lowering the impact on the market price by using a pre-computed schedule for implementing a bigger order.
