The Gateway to Algorithmic and Automated Trading

From adversity to diversity

Published in Automated Trader Magazine Issue 28 Q1 2013

Perhaps the single most important observation from these initial survey results is that many of the trends that we started to see developing two to three years ago, corroborated by the results of Automated Trader surveys, have continued to gain momentu...

John Knuff

John Knuff

General Manager, Global Financial Services, Equinix

Perhaps the single most important observation from these initial survey results is that many of the trends that we started to see developing two to three years ago, corroborated by the results of Automated Trader surveys, have continued to gain momentum.

The growing need for firms to be more creative in their quest for competitive advantage is clearly demonstrated by the statistics related to key business challenges. Looking back to 2010, 'finding alpha' barely featured in respondents' choices. In stark contrast, it was the most common selection this year - by a considerable margin.

Very rapid growth in automation has clearly brought competitive pressures to the more vanilla strategies, forcing traders to become not only more creative, but also to look much further afield. The smart money is looking for alpha in new markets, and trading firms are now leveraging their IP and competitive advantage across more asset classes, trading venues and regions than ever before. At the same time, firms are choosing from an increasingly diverse range of data sources and services for both alpha signalling and risk management purposes.

The survey results clearly show that while maintaining relative latency at competitive levels continues to be a focus for the majority of trading firms, there is a shift in emphasis from outright execution latency to decision latency, as firms look further back into the trade lifecycle to hold on to their position amongst the latency leaders.

These strong trends towards multi-region and multi-asset class trading, an increasing dependency on an ever wider range of data and services, together with a continuing focus on latency, all help to explain why the statistics show yet further anticipated growth in the use of colocation.

Around 40% of both buy and sell side firms expect their use of colocation services to grow over the next one to two years. However, the figures for trading firms are eclipsed by almost 54% of vendors and venues who anticipate growth in their colocation deployments. Clearly, adversity induces diversity.

Further details on the survey findings can be found here