Are ATPs (Automated Trading Platforms) going to be a threat to the existence of human brokers?

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Expert Solution

Yes, it is considered as threat to human brokers. Followings are the reasons behind it:

Automated trading platforms are algorithm trading which is a computer program generates automatic orders based on the rules of trading strategy.
These are electronic trading platforms in automated market centers, exchanges and other trading institutions.
ATPs can wipe out repetitive tasks and perform much faster than human equivalent. Now a days trading curbs are in place to manage risk factors associated with the portfolio position. So it will be much more effective than before.
It is considered as threat to brokers because it is able to achieve higher order entries which is extremely beneficial for the current market.
These systems will reduce human processing errors and increases production efficiency.
It allow users to trade in multiple accounts with diversifying their portfolio. As a result risk will also get mitigated and net earnings will rise.
So the need for human brokers is no more required and customers don't have to pay brokerage commission. It will attract the investors to opt for it and reduce their cost expenses.
Mean reverting time series method in ATPs will maintain data consistency. So that in trading platforms all settlement will be checked properly. It is not possible through brokers.

Hence ATP is the advanced technology which will improves the trading productivity.

All the best for your exam! Thank you!

jeff jeffy answered 6 months ago

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