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The Evolution of Algorithmic Trading (Strategy Focus)

Product Type: Market Research Report
Published by: Datamonitor
Published: November 2006
Product Code: R313-18227
Description
Introduction

As financial institutions battle with ongoing competitive pressures, there have been radical transformations in trading systems in global markets. Institutions are looking for advanced trading platform functionality in order to gain the ever important competitive advantage.

Scope
  • Discusses the changing nature of the buy-side / sell-side trading relationship
  • Examines the future trading tools being developed for superior performance
Highlights

Once the choice to use an automated strategy has been made, the question of which specific algorithm to implement then has to be addressed. The ability to rate and rank algorithms through effective Transaction Cost Analysis (TCA) is increasingly seen as the key to successful performance.

Whilst algorithms in the past have predominantly focused on equities, as the market evolves demand for algorithmic tools that go beyond the traditional realm of the equity world is steadily rising. This has been driven heavily by the presence of multi-asset class hedge funds.

The ability to tweak sell-side algorithms is a major trend likely to continue to occur in the new wave. By streamlining the process of algorithm alteration, an increasing amount of power is being placed in the hands of the buy-side trader. It is yet to be seen how much power the buy-side will take from their sell-side counterpart.

Reasons to Purchase
  • Understand the algorithmic trading environment of the future
  • Learn about next generation algorithms targeted at achieving competitive advantage
Table of Contents
DATAMONITOR VIEW
CATALYST
SUMMARY


ANALYSIS
The growth of algorithms is driving new responsibilities for the buy-side in the trading process
Technology is gradually shaping a new role for the sell-side
The abundance of algorithms is placing increased focus on analyzing transaction costs
Choosing between algorithms from one provider
Choosing between different providers' algorithms
Newer products will follow a different evolutionary cycle to that of equities
Different products are emerging on the algorithmic use but progression must be hesitant
The next generation of algorithms will target greater intelligence to combat competition
Customised algorithms
Portfolio algorithms
Algorithms adapting to events
Advanced algorithms moving up the value chain
Alternatives to using sell-side institutions are gaining in popularity for algorithm access


APPENDIX
Definitions
Extended methodology
Further reading
Ask the analyst


List of Figures
Figure 1: Investment currently focused on trading tools in the front office
Figure 2: The path to algorithmic adoption for equities may not be standard for other products
Ordering and More Information
Price and Delivery Options


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