Automated algo trading: Introduction and Market Overview
Automated algo trading initiate profit opportunities at great frequency and speed, by programming the computers to follow a specific set of calculations, guidelines, and instructions. Automated algo trading makes trading more systematic and liquid, as the algorithm rules out human trader’s emotional impact on it. Also, automated algo trading platforms execute trading at the best prices. Algorithms that make automated algo trading possible can monitor the trade market throughout the day and night. Thus, it diversifies the trading and there are no missed opportunities, and the moment a position is entered, all trading orders like profit parameters and stop loss are spontaneously generated. In automated algo trading, the algorithms stick to an unwavering trading plan involving the trade’s price, timing, quantity and other mathematical parameters.
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The automated algo trading market is expected to experience a steady boost during the forecast period, owing to the participation of international markets leading to efficient allocation of savings globally. This also helps countries create portfolio diversification and mutual risk sharing opportunities, which is in turn expected to drive the global automated algo trading market. The liquidity in equity market due to integration of financial markets is a major factor that would drive the automated algo trading market during the forecast period. Multi-national investment banks generating high revenue are making significant investments to develop and upgrade their own automated algo trading strategies and platforms.
However, increase in the amount of data to be processed and increasing demand for data processing speed are some challenges that the automated algo trading market is expected to face during the forecast period. Along with several benefits, there are certain risks as well to automated algo trading. Sudden system failure; time lags in orders and executions, erroneous network connectivity; and imperfect algorithms could bring the automated algo trading infrastructure down.
Automated algo trading: Competitive Landscape
The automated algo trading market is considerably competitive with continuous product and technological developments by already established as well as new players. Some of the key players in the automated algo trading market are Vela, AlgoTerminal LLC, Cloud9Trader, Quantopian, Trading Technologies International, Inc., QuantConnect, AlgoTrader GmbH, InfoReach, Inc., Tethys Technology, and Citadel, among others.
Automated algo trading: Technology Innovation
Automated algo trading technology is continuously upgraded to facilitate the industry. In February 2018, Fidessa Group PLC announced a partnership with Virtu Financial. This partnership, in the automated algo trading sector, aimed at enabling clients to access Virtu Financial’s fully disclosed and transparent liquidity, together with upgraded upstream workflow in order to manage more complex trading environment that the brokers find themselves in.
Automated algo trading market, at the moment, is experiencing significant developments driven by various vendors in the space. In January 2018, Zerodha partnered up with Streak, a start-up, in order to provide an automated algo trading platform where traders can develop algorithms to generate trading signals for selling or buying stocks without any coding requirements.
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Automated Algo Trading: Market Segmentation
By automated algo trading end-user, the global automated algo trading market can be segmented into,
- Personal Investors
- Credit Unions
- Pension Funds
- Insurance Firms
- Prime Brokers
- Investment Funds
- Investment Banks
With regards to automated algo trading application, the global automated algo trading market can be segmented into,
- Trade Execution
- Statistical Arbitrage
- Strategy Implementation
- Electronic Market-making
- Liquidity Detection
Automated Algo Trading: Regional Outlook
North American market, being the most prominent in automated algo trading market globally, is expected to lead the global revenue generation owing to the technological advancements and significant penetration in the financial markets