Sell-side firms have been unveiling new algorithms at an almost
dizzying pace, making it clear that electronic trading continues to
grow in complexity as its usage increases. These strategies include
liquidity-seeking models that swiftly access the growing number of
dark pools and crossing networks, and algorithms for small-cap
stocks, foreign exchange and large portfolios. There are also
adaptive algorithms, which are designed to respond to shifts in the
market as a live trader might.
A big reason for the increased number of products is that usage
of, and demand for, algorithms on the buy side shows no sign of
letting up. According to Aite Group, a Boston-based research firm,
33 percent of total equities trading volume flows through
algorithms, up from 15 percent a year ago. Aite forecasts that the
proportion will rise to 53 percent by the end of 2010. "Algorithms
are being used by an incredibly expanded base of clients," noted
Brad Bailey, a senior analyst at Aite. "It's not just hedge funds
anymore." |
