With algorithmic trading firmly entrenched in the equities world, a handful of Wall Street's biggest players are leading efforts to make them equally ubiquitous in the options market. The past few months have seen a spate of algorithm launches. In December, UBS released a set of four options algorithms, calling it the first phase of a series of releases. Since then agency brokerage BNY ConvergEx Group has introduced its own suite and Goldman Sachs' electronic trading division has rolled out two new algorithms, with more on the way.
Sang Lee, co-founder and managing partner of research firm Aite Group, calls it "an extension of what's happening in the equities market--trying to leverage that infrastructure and moving algorithms into other asset classes." Boston-based Aite has estimated that 20 percent of flow in the U.S. options market will be algorithmically generated by year-end 2010, up from 7 percent last year. "I would say this is just in the beginning stage," said Lee. "It's a natural progression of what's been happening in the market."
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