Trading Instruments: How They Have Evolved
Before the advent of stock exchanges, trading instruments consisted solely of paper and stamp. It was only the tradesmen that kept the paper as they made their payments.
But, there is no reason why these paper trade instruments could not be used in electronic commerce. People could use these trade instruments to conduct transactions, at least, electronically. But before a stock exchange can be established, there has to be a suitable trading platform.
These were called 'financial instruments'. The earliest ones were 'ticker-tape instruments 'trading instruments'. They were simply written down on stubs of paper, with a slip of wax, when traders wanted to sell, or buy.
They were also known as 'trenders', as they always followed a particular trend, which was predicted by the stock market analysts. Some of these trends were predictable, and therefore, trading instruments were used in predicting the movement of the price of the securities, from the start of the trend to its end.
These paper trade instruments had to be kept in a safe place, as they were easily stolen and even destroyed. Therefore, security had to be provided for them.
A trading platform was the instrument through which the securities could be traded. This platform would, with the help of a trader, be able to control the various trades.
In the olden days, a reliable dealer had to be selected. But nowadays, different traders come to the exchanges and post their orders for their stocks. Some traders also have some risk in their trades, so they also join the exchanges.
Trading and selling have now become more than just paper. With the help of electronic trading platforms, it is possible to send and receive trades in real time.
Buying and selling stocks has also become very easy. Nowadays, traders need not go to the stationery store to purchase their stock, as they are bought electronically, through online stock exchanges.
However, if they want to exchange stock, they have to be ready for an additional fee, as they will need to get their shares ready, before the actual exchange. This allows the brokers to buy their stocks at a lesser rate.
But still, if the information technology continues to evolve, it is expected that online stock exchanges will expand, and so will the need for trading instruments. The companies will also be in a position to make these instruments to help their customers.
So far, it has been observed that trading instruments provide more convenience and flexibility, but they do have disadvantages too. It will be better for companies to come up with a plan for that, before it becomes so widespread.