Innovations in Financial IS and Technology Ecosystems: High-Frequency Trading in the Equity Market

Technological Forecasting & Social Change, Forthcoming

35 Pages Posted: 5 Mar 2015 Last revised: 6 Mar 2015

See all articles by Robert J. Kauffman

Robert J. Kauffman

Singapore Management University; Singapore Management University - School of Information Systems

Jun Liu

Agency for Science, Technology and Research; Singapore Management University

Dan Ma

Singapore Management University

Date Written: December 4, 2014

Abstract

Technology-based financial innovations over the past four decades have led to transformations in the financial markets. Understanding technological innovations in financial information systems (IS) and technologies has been challenging for technology consultants and financial industry practitioners due to the underlying complexities though. In this article, we propose an ecosystem analysis approach by extending the technology ecosystem paths of influence model (Adomavicius et al., 2008a) to incorporate stakeholder actions, considering both supply-side and demand-side forces for technological change. Our ecosystem model brings together three original core elements: technology components, technology-based services, and technology-supported business infrastructures. We also contribute a fourth new element to this approach involving stakeholder analysis. We investigate innovations in the area of high-frequency trading (HFT) technologies as a basis for empirically validating the existence of several different patterns in the historical path of technology evolution. Our analysis results suggest that supply-side and demand- side forces influenced HFT technology innovations and contributed to changes in the financial markets. This research represents some of the first work that investigates financial market technology innovations at the technology and stakeholder levels. It also offers a useful and practical tool to help managers and analysts to understand the nature of technology-based financial innovations and the relationships between technology and financial markets that support their emergence.

Keywords: Algorithmic trading, financial markets, financial innovation, high-frequency trading, technology-based innovation, paths of influence, technology ecosystems

Suggested Citation

Kauffman, Robert J. and Liu, Jun and Ma, Dan, Innovations in Financial IS and Technology Ecosystems: High-Frequency Trading in the Equity Market (December 4, 2014). Technological Forecasting & Social Change, Forthcoming, Available at SSRN: https://ssrn.com/abstract=2573903

Robert J. Kauffman

Singapore Management University ( email )

Li Ka Shing Library
70 Stamford Road
Singapore 178901, 178899
Singapore
65-6828-929 (Phone)

Singapore Management University - School of Information Systems ( email )

80 Stamford Road
Singapore, 178902
Singapore

Jun Liu (Contact Author)

Agency for Science, Technology and Research ( email )

1 Fusionopolis Way
#16-16 Connexis
Singapore, 138632
Singapore

Singapore Management University ( email )

School of Information Systems
80 Stamford Road
Singapore, 178902
Singapore

Dan Ma

Singapore Management University ( email )

School of Information Systems
80 Stamford Road
Singapore 178901
Singapore

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