Electronic Order Routing Systems and Security

Order routing systems pervade the financial market. They are used by customers to send orders to their brokers and dealers. Brokers use the same systems to forward their customer’s orders on to dealers and exchanges. Dealers use order routing systems to send orders amongst themselves, and exchanges use them to send orders to other exchanges. Routing systems must be accurate and quick to keep pace with the market and save time. The advent of the electronic order routing system 電子訂單 meant that lightening fast orders could be transacted remotely, not just on the floor of the exchange or on the phone. The electronic systems are faster and cheaper. They changed to whole face of the market.

While it is perfect for customers because it is fast and convenient, electronic order routing and security has become a major concern for exchanges. As is often the case, as new technology solves problems, it also creates new ones. It is important that careful records be kept of electronic transactions in case of a problem, because there is no paper trail to follow. Several brokerage firms have adopted hand held devices used by brokers in the trading pit that receive orders electronically from customer’s work sites. Using the handheld devices, brokers can receive, execute and confirm an order in twenty seconds. The confirmation is sent directly to the customer. The system has eight time stamps applied during the process which creates a very accurate audit trail should it ever be needed.

Much of the current debate over electronic order routing and security is about what system should be adopted. Some of the parties involved would like to see one system used by all brokers, while many of the trading firms want the freedom to develop their own proprietary systems. The main concern of the exchanges is that the system has safeguards in place and is capable of being audited for the sake of transparency.

Most insist that the audit system should be specified by the exchange, but the maintenance of the audit trail should be the responsibility of the brokerage firms. One way to deal with concerns over compliance would be to levy fines for failure to submit timely reports. This would provide the necessary incentive to brokers to make sure that their electronic routing systems were functioning as they should and would ensure that security was maintained.

Another security measure being implemented is a wireless radio network with designated frequencies used to receive on hand held trading devices. This will allow monitoring of practices and also allows for security encryption to prevent the theft on proprietary information. Electronic order routing is being adopted slowly but surely. Some firms have switched over entirely, while others are implementing it side by side with existing traditional practices as the perfect their systems. New exchanges being built are allocating as much space to computers and networks as they are to the trading floors.

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