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The rising level of algorithmic and automated trading is one of the key drivers behind a major technology and service overhaul at OMX
Northern Exposure
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Jukka Ruuska: “… using FIX FAST means lower latency than proprietary protocols, less bandwidth usage, and a simpler message structure that will facilitate system upgrades at lower costs.” |
The Nordic Exchange has reported record share turnover recently. To what extent has an increase in algorithmic and automated trading played a role?
The Nordic Exchange is a number of exchanges operating across a single technology platform and according to one set of rules and as such there are different levels of algorithmic and automated activity across the exchanges. There is a higher level of algorithmic trading in Helsinki, for example, because that’s where Nokia, our biggest and most liquid stock, is listed. It is difficult to be precise about levels of algorithmic and automated trading, not least because there are differences in how the two are defined, but our working assumption is that both algorithmic and automated trading are growing very rapidly, currently accounting for at least a fifth of overall trading volume on the Nordic Exchange and possibly quite a lot more.
In total, daily trade value at the Nordic Exchange increased to SEK50,523m (EUR5,446m) in the first half of 2007, from SEK43,722m (EUR4,713m) in the first six months of last year. Over the same period, daily transaction volume increased to 177,423 from 129,461. It’s worth noting that for every one unit increase in trading volume, we estimate a 2.5 unit increase in order traffic. So what’s driving this growth? Clearly, we’re seeing different trading patterns by investment banks and some types of investors; execution is taking place via algorithmic means to limit risks and make execution more efficient. From an exchange’s point of view, this is excellent news. Algorithmic and automated trading are bringing heavy flows to the Nordic Exchange and improving liquidity significantly, thus making electronic order books much more efficient.
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