The Gateway to Algorithmic and Automated Trading

Ever faster, yet ever more diverse

Published in Automated Trader Magazine Issue 28 Q1 2013

Automated Trader's latest survey conveys a picture of strong growth, dazzling innovation and growing maturity. There is a more global spread of skills and an increasing diversity of interests and priorities; all ingredients for a good market and political tensions. If anything, the pace of some of last year's trends of end-to-end automation across asset classes and jurisdictions has quickened; other trends have slowed or evolved. Enthusiasm to compete in the race to zero has not faded, although more people realise they will not be first at the exchange. Nevertheless, they are still busy investing to at least not drop too far behind the leading pack.

The focus on execution latency is rapidly giving way to decision latency (the pre-trade time to recognise a trading signal and place or cancel an order) and value latency (the time to confirm and process the transaction flows post-trade and extract their impact on alpha). The obsession with time and speed has become pervasive. Risk too has won mind share, perhaps not surprisingly given the collateral damage sustained by some high-speed broker-dealers. Attitudes towards regulation are fragmenting. While many feel the rule making process has gone astray, trading firms are resigned to coping with it and are open to changing priorities, strategies or even jurisdictions in order to remain viable.

Key points to emerge from the data

The survey recorded responses from 615 market participants and professionals. The number of respondents for Asia and emerging markets increased by 50% from the previous survey, with many more buy and sell side firms featuring in all categories. Overall, 41% of respondents were buy side, 20% sell side, with the remainder from exchanges, market infrastructure and technology firms. One regulator and a few academics also responded.

Both big and small players were well represented, with buy side respondents from traditional asset management firms, hedge funds, proprietary trading firms, family offices and trading arcades all responding in good numbers. Of the traditional asset managers, almost 16% had over $10 billion under management, whilst one-third of hedge funds managed more than $100 million and 17% managed over $1 billion. On the sell side, over 20% had balance sheets in excess of $500 billion, while 43% had more than $5 billion in assets and liabilities.

Top Trading Challenges
Top Trading Challenges

The survey posed 144 probing questions to record the most panoramic picture of global trading trends ever. In total, the survey produced 67% more data than last year. This preliminary analysis highlights just a few of the many conclusions that will be exhaustively mined in the final report.

Key Challenges and the Latency Squeeze

While two-thirds of the buy side were still focused on finding alpha, more were concerned with ...

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