A Global Round Trip

First Published in Automated Trader Magazine Issue 06 July 2007

Exchanges around the world are investing in new technology and services to attract a greater share of algorithmic and automated trading volumes. Chris Hall takes a whirlwind tour of the exchanges that are pulling out the stops to bring much-needed sources of liquidity to local markets.

Overshadowed perhaps by the efforts of US and European exchanges to attract algorithmic and automated trading volumes, competition between less established markets is equally fierce. Exchanges across all continents are updating legislation, upscaling technology and upgrading bandwidth to attract algo and auto traders that are looking to apply their models to new markets.

“There’s a huge amount of investment going on in IT infrastructure by exchanges to increase message processing capabilities, and thereby increase volumes,” says Yousaf Hafeez, Director of Product Development, BT Global Financial Services. “But the investment in technology has to be an ongoing process; the more information you can provide to algo traders the higher their volume of trading.” Hafeez, responsible for exchange partnerships at BT, suggests exchanges’ efforts should be focused on three key areas: low latency data feeds that supply every price tick; colocation services to further reduce latency; and use of pricing models that reward higher order flow volumes. “If they can embrace these changes, exchanges in emerging markets will soon see rising volumes on their venues from algo traders,” he says.