Product Type: Market Research Report
Published by: TowerGroup
Published: September 2004
Product Code: R301-1021Description Quantitative trading strategies, including algorithmic trading and arbitrage or strategy trading, have emerged as the next generation of solutions to facilitate the electronic trading markets. This status is driven more by the changing market structure and movement to electronic trading than by the revolutionary capabilities of the underlying algorithms. Fragmentation of liquidity and lower commission price points are driving the buy side to use algorithms, while institutional brokers are using algorithms to lower their own trading costs in order to support those lower commission price points. Those same institutional brokers apply algorithms to further automate the electronic trading capabilities for the buy side while offering a value-added layer that gives them the chance to wrap additional services and higher fees to algorithmic trades. This practice has spawned an arms race as brokers rush to offer algorithms and gain mindshare and market share in the quantitative trading space.Table of Contents - TowerGroup Take-Aways
- Report Coverage
- Vision for Algorithmic Trading
- Defining Algorithmic, Arbitrage/Strategy, and Quantitative Trading
- Exhibit 1: A Variety of Product Offerings Are Often Lumped and Labeled Algorithmic Trading (2004)
- Algorithmic Trading Strategies Defined
- Quantitative Trading Solutions Providers
- Exhibit 2: Segmentation of Algorithmic and Arbitrage/Strategy Trading Providers or Enablers (2004)
- How These Algorithms Are Delivered
- Brokers Providing Algorithms
- Brokers Providing Algorithms and Trading Platforms
- Third-Party Software Providers
- Quantitative Trading as a Competitive Yet Complex Advantage
- Is Quantitative Trading the Silver Bullet?
- Drivers for Quantitative Trading
- Arguments for Quantitative Trading
- Arguments Against Quantitative Trading
- Trends in Quantitative Trading
- Commoditized Access
- The Next Boon for Order Management Systems?
- Financial Information eXchange Protocol
- Transaction Cost Analysis
- International
- Nonequity and Cross-Asset-Class Algorithms
- The Size of the Algorithmic and Arbitrage/Strategy Trading Market
- Exhibit 3: Percentage of US Equity Trades Flowing Through Algorithms/Trading Strategies (2004)
- How Does the Future of Algorithmic Trading Look?
- Quantitative Trading Becomes More Robust
- Electronic Trading Continues to Cannibalize the Institutional Cash Desk
- Exhibit 4: Trends in US Equity Flow via Electronic Channels (2000-06)
- Algorithmic Trading Commands a New Commission Schedule
- Exhibit 5: US Buy-Side Equity Algorithmic Trading and Program Trading Volume (2000-06)
- Comfort with Algorithmic Trading Leads to Increased Use of Algorithms
- Exhibit 6: Explosive Growth Expected in US Equity Algorithmic Trading (2000-06)
- Exhibit 7: Growth in US Equity Quantitative Trading by Channel (2004-06)
- The Growth in Quantitative Trading Is Limited
- Summary
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