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!