Patent stock market patterns
A new study by New Zealand's University of Otago has used US patent data to shed light on the technological roots behind Wall Street's ongoing 'technology arms race'.
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The way financial assets are traded, and the nature of the markets themselves, has dramatically changed over the last two decades, says study co-author Dr Ivan Diaz-Rainey of the University's Department of Accountancy and Finance. But it's not just about trading speed.
We're seeing technology used more when firms are first issuing securities and even the use of neural networks in portfolio selection. A body of research already exists examining how these technological changes have impacted the efficiency of trading.
Using content analysis techniques, Dr Diaz-Rainey, along with co-authors Dr Michael Falta and doctoral student Stephan Essendorfer, examined patent information extracted from the United States Patent and Trademark Office database.
Specifically, the researchers examined market infrastructure MI patents for software or hardware used in trading filed between January and December However, traditional finance firms are powerful and commercially astute so it is reasonable to assume at least some will have responded aggressively by patenting new MI technologies themselves," says Dr Diaz-Rainey. Analysis of the patent data confirmed that the top firms behind most of the MI patents were indeed a mix of 'new entrant' and 'incumbent' firms.
The researchers' analysis revealed that the leading MI patentee is not an established firm, but a private software firm, Trading Technologies International. In terms of the pattern the MI patenting has taken, their analysis reveals that the MI revolution began in the mid-to-late 90s and has been more intense in comparison to general patent filing levels of the same time period.
Though the data used in the study was US-based, Dr Diaz-Rainey says his team's analysis may be of interest to the New Zealand market. So I guess a question is do we want to move towards this? Dr Diaz-Rainey says the impact of these findings on the financial research sector "cannot be understated. Was it the finance firms themselves?
Were there new players involved? We just didn't know. We were in the dark. This paper is just the start. Materials provided by University of Otago. Content may be edited for style and length. Get the latest science news with ScienceDaily's free email newsletters, updated daily and weekly.
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Stephan Essendorfer, Ivan Diaz-Rainey, Michael Falta. Creative destruction in Wall Street's technological arms race: Evidence from patent data. Technological Forecasting and Social Change , ; DOI: MLA APA Chicago University of Otago.
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