Internet trading

Thanks to Internet technology, purchasing valuable securities recognized throughout the whole world as one of most economically effective ways of spare capital investment has become available to all those interested. Anyone can create an investment portfolio within seconds, after which he will be able to manage assets instantly, collecting all the necessary information (quotations, analysis, forecasts) from any point of the world. Demand for interactive trading in shares, options and futures grows every day. More and more banks and brokering companies, including those in Russia, cultivate this promising new area of activity. Internet trading attracts potential investors, first of all, with its ease of access to information, simplicity of dealing, servicing possibilities and affordable prices for on-line brokers' services. Let us take a closer look at the technical aspects of such systems' organization.

An Internet trading system is installed in a bank or a financial company operating on one or more valuable securities markets. The market is organized by stock exchanges or groups of companies (an over-the counter market). Financial companies having direct access to the market (access to trading systems of stock exchanges or OTC trading systems) operate as brokers. All other companies can gain access to the market only through brokers and have the investor status.

The traditional pattern of interface between the broker and the investor implies a telephone contact which the broker uses to inform the client of current market prices and the client uses to make purchasing or selling orders. The broker enters the orders he received into the system from the corresponding stock terminal installed at his working place. The Internet trading system ensures automatic submission of applications by the investor directly to the stock exchanges' trading systems, as well as monitoring his portfolio status in real-time mode. Naturally, the client conducts all his operations within certain restrictions (limits) set for him by the broker. Thus, the broker still remains the link between the exchange and the client and determines the procedure of client's activity on the market. 

In general, the Internet trading system architecture comprises the following principal components:

• a remote soft hardware complex of the exchange;
• a gateway (a soft hardware interface) providing automatic information exchange between the stock exchange and the broker. As a rule, the gateway is a dedicated computer installed at the broker's site and connected to a dedicated corporate network of the exchange through a secure communication link;
• a broker's soft hardware complex allowing the broker to execute all operations necessary for client management: registering clients and operating on the client base, administrating clients, maintaining the database, monitoring and managing limits, collecting and monitoring clients' applications, delimiting information access rights and exchanging information with clients;
• a client's workbench.

Besides the above-mentioned components, the system also includes information protection facilities providing secure information exchange between the client and the broker.

Internet trading systems may also have no connection to stock exchanges or external trading sites; in that case trading is carried out within a local client group of the same broker. However, this may only be reasonable if the number of broker's clients is large enough.

The soft hardware complex of the broker is the key element of the Internet trading system, providing an interface between the broker and the client, the broker and the stock exchange, as well as between other subsystems. The broker's soft hardware complex comprises the following principal components providing execution of trading and registering operations: 

• an application protocol controller for exchanging data with the client;
• an application server providing execution of trading operations and interface with the database server;
• a database server responsible for reporting funds on accounts and shares in clients' depositaries;
• an application protocol controller for exchanging data with stock exchanges and trading sites through corresponding gateways;

Using the hierarchical structure allows variants when a broker (sub-broker) with his own client base is a client of another broker (sub-broker). The sub-broker can manage his clients within certain limits set for him by the main broker. In this event, the soft hardware complex of the broker should also provide for sub-broker operation functions.

The RAMAX International Company has developed the Internet trading system iNetTrade that conforms with the principal requirements of such applications and offers the possibility of rendering a wide range of services over the Internet.