Southampton - Our everyday lives are becoming increasingly electronic. Electronic mail (email) has pretty much taken over the traditional role of the U.S. Postal Service. Electronic phone communication (cell phones) has nearly replaced analog landlines. Even in the most prosaic daily existence electronic technology in the form of cleaning robots is nudging out human maids in tasks like cleaning floors. Naturally, electronification has also extended to financial services and investments.

Today's investors use electronic networks often without giving the process a second thought. Even "discretionary" investors making human investment decisions akin to Warren Buffet (as opposed to "systematic" investors aided by computer models) are largely serviced by electronic machines: the investors' brokers input their clients' investment decisions into computer networks, where the decisions are nearly instantaneously transmitted to exchanges, from where order acknowledgements are immediately sent back to the investors, all with barely any human interference. Due to the reliability of modern electronic communication, such a fast order processing environment has resulted in considerably lower error rates in recording and transmitting the order, lowering transaction costs for all investors across the board.

Yet, the electronification of investing has also raised alarms about possible abuses of trading technology. On several exchanges, the electronic order messaging has been observed to periodically peak in volume during certain times of the day, often around round hour, minute, or even second marks. Such high volume at specific times is taken to be indicative of investing computer programs clogging up communication channels for everyone else desiring to buy or sell stock shares or other financial instruments. Academics, exchanges and regulators are working to resolve the network clogging issues with the fewest negative consequences for other market participants.

Aside from the network clogging issue, however, electronic investing has been shown to produce positive impact on financial markets. In addition to lower error rates, and the resulting lower transaction costs, computers now increasingly offer to serve as the opposite side of the trade, "a counterparty," to countless investors, adding the so-called "market liquidity" in the process. When a human order arrives to the exchange, it is executed instantly and at much better prices than ever before. The order execution speed and favorable pricing are advantages brought by a rising number of electronic traders competing to serve human investors.