Electronic Trading

Electronic trading is the buying and selling of financial instruments through automated systems, without human intermediaries executing individual orders. In electronic markets, trading platforms match buy and sell orders based on price and time priority, completing transactions in milliseconds. The vast majority of activity on exchanges worldwide today is electronic. This is the modern counterpart to

, where traders stood on a physical floor and negotiated face to face: electronic trading handles algorithmic pricing and hedging at scale across millions of instruments simultaneously, while floor trading relied on human voice and hand signals in a single location. The two models reflect different eras of market structure, and most major venues transitioned from the floor to the screen over the past two decades.

When a firm like Optiver makes markets electronically, it continuously posts both a bid price, the price at which it is willing to buy, and an offer price, the price at which it is willing to sell, across millions of instruments simultaneously. The difference between these two prices is the

, which reflects the cost of providing

liquidity

and the risk taken by the

market maker

. Algorithms assess market conditions and update these quotes continuously, adjusting prices in response to new information, movements in related instruments, and changes in supply and demand. When a correlated instrument moves, an electronic system can rehedge the book within microseconds, adjusting exposure across thousands of linked positions before the market price has time to settle.

Electronic trading allows market makers to provide liquidity at a scale that would not be possible manually. By continuously posting two-way prices, market makers ensure that investors and institutions can buy or sell instruments quickly and at fair prices, including during fast-moving market conditions.

Speed is central to how electronic trading works. Exchanges process millions of messages per day, and market makers must update their quotes as fast as market conditions change. This requires purpose-built technology, including hardware designed to minimise the time it takes for information to travel between systems. Optiver operates on exchanges across the Americas, Europe, and Asia-Pacific, posting prices across equities,

,

futures

, and

ETFs

. This automation also tends to narrow bid-ask spreads over time: when many market makers are pricing the same instruments, each competes on speed and price, which compresses the cost of execution for all participants.

Suppose a market maker is quoting shares of a large European company. Its algorithm processes market data, including recent trades, current

 depth, and broader index movements, and calculates a theoretical fair value of €50.00 per share. The market maker posts a bid of €49.97 and an offer of €50.03. Any investor wishing to buy or sell the shares can do so immediately at those prices. When a correlated index future then moves sharply, the algorithm updates the quote within microseconds, pulling both sides of its market and re-posting new prices before any slower participant can trade against the stale quote.

Institutional investors often need to execute transactions in sizes that the public order book cannot absorb without moving the price. For more on how those trades are handled, see our explainer on

.