The Floor Trader vs. Automation: A Survey of Theory and Empirical Evidence

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Abstract
We survey empirical studies on the development and effects of increased computerization across equity, foreign exchange, derivatives, and fixed-income markets. While the changes in the trading process due to computerization in less liquid markets such as the corporate bond market have been modest, there have been dramatic changes in certain derivatives markets, foreign exchange, and in particular equity markets. In many instances, previous research has found positive effects of computerization on measures of market quality, but our survey highlights that human intermediation is still prominent and beneficial in certain areas.