Series 3: 6.3.4. Electronic Trading Systems And Electronic Orders

6.3.4. Electronic Trading Systems and Electronic Orders

Electronic trading systems have largely displaced the open outcry system that had prevailed for the past 150 years. Electronic orders are entered on computer terminals at the office of a futures commission merchant and sent to a “host computer” at the exchange. The host computer receives the orders, processes them, and executes the trades in place of the trading pit. A computer network links the two systems to one another, allowing them to exchange data. The host computer matches bids and offers arriving from terminals all over the world and immediately returns the match to the brokers’ terminal for confirmation of the trade. Order priority is established automatically, generally by price and time of entry. The size and type of order may also be a factor in prioritizing order execution.

The advantages of elec