The brokerage world is changing: The evolution of the trading platform
Once upon a time, brokers played a passive role in the financial markets. They took orders, executed trades and collected their commission. At the same time, they were the intermediaries that held the key to the financial markets.
Fast-forward to today and the brokerage community has evolved dramatically. This reflects the increasingly complex nature of the financial markets. Digitisation has reshaped how the markets are executed and how traders access financial securities. Financial trading platforms have undergone a similar evolution by offering investors more ways to diversify, not to mention all the bells and whistles to make it happen.
Against this backdrop, the answer to what is a trading platform is more interesting than you may have initially thought. To truly answer this question, it’s important to reflect on the history of the brokerage community up until this day.
What is a trading platform?
In the simplest terms, a trading platform is a software through which investors can manage their portfolios. These platforms allow investors to open, close and manage their positions.1 More advanced platforms also provide a bevy of value-added features, such as charting tools, training resources and customised display of fundamental data.
Trading platforms are offered by regulated financial brokers. They are the entities that have obtained the necessary licenses and have met the stringent compliance rules needed to enter business. As a general rule, traders should only conduct business with brokers that are fully regulated by national and/or regional financial authorities. This is the only way to guarantee security of funds.
How trading platforms evolved
Trading platforms have evolved over many decades in response to the changing nature of the financial markets. The first major shift occurred all the way back in 1975 when the US introduced negative commissions. From that point on, trading platforms have become much more competitive.
Of course, electronic trading had a dramatic impact on volumes, liquidity and the cost of intermediation. This not only increased efficiency, but created more competition in the broker community. This in turn led to the erosion of commission rates, which forced many brokers to re-evaluate their business model.
Since then, the broker industry has faced an uncertain future. At the same time, increased competition and the need for advanced technology has opened the door to online brokers. These brokers have proven to be more nimble and responsive to change. As a result, they’ve been the first to capitalise on the massive shift in online retail trading.
The online self-directed brokerage market is emerging as the platform of choice for retail traders. Convenience, resources and access to hundreds of markets are all reasons why traders have opted for online-only platforms. In the age of digitisation, traders realise they never need to step foot in an institution to make money. They can conduct all their research online, interact with other traders for information and follow the financial news in just a few clicks. In the era of intermediation, only brokers had access to these resources.
Today, trading platforms are delivered via desktop traders, web portals and mobile apps. The most advanced brokers combine a portion of each to provide investors with round-the-clock, real-time access to the markets. This is increasingly reflected in the power and sophistication of mobile trading apps, which are now an extension of the desktop version.
This explains why retail forex trading has exploded in recent years. By 2015, there were four million retail forex traders spread around the globe.2 This figure has likely risen as online trading continues to grow. Of course, this only scratches the surface of the entire online trading community, which is actively involved in options, futures, stock indices, commodities or CFDs.
That being said, the online broker community has proven to be extremely competitive. As a result, only a select few brokers have withstood the test of time. Traders have latched on to them for their reliability, strong services and history of regulatory compliance. One such platform is easyMarkets, which was founded in 2001 as a forex trading platform before expanding to become a global financial market broker.
While easyMarkets is a web-based platform, it also provides MT4 – the industry standard for online trading. MT4 must be downloaded and installed directly on the desktop, where traders receive a custom user experience and powerful charting tools. The web platform provides similar features, but also allows traders to access their accounts from any computer simply by singing in. Both platforms have different benefits, but each is considered equally powerful.
This is just one example of MT4 and web-based trading in use. Several other brokers have also licensed the MT4 software and developed their own web-based portal.
The global financial markets are clearly evolving, and online trading platforms are on the leading edge of that evolution. As demand for convenience, mobile trading and value-added tools continue to grow, online brokers will be the industry standard for the foreseeable future.
1Investopedia. Trading Platform.
2European Central Bank. State of the Retail Foreign Exchange Market (Citi Presentation).
About Boris Dzhingarov
Boris Dzhingarov graduated UNWE with a major in marketing. He is the CEO of ESBO ltd brand mentioning agency. He writes for several online sites such as Tech.co, Semrush.com, Tweakyourbiz.com, Socialnomics.net. Boris is the founder of MonetaryLibrary.com and cryptoext.com.
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