[ A L G O R I T H M I C
T R A D I N G
S U R V E Y ]
Doubling down
on algos
The 2019 algorithmic trading survey finds that brokers are stepping up to the plate
in the post-MIFID II landscape to provide consistent execution to hedge fund firms
that are more knowledgeable and discerning than ever before.
T
he first part of this year’s algo-
rithmic trading survey, pub-
lished in Issue 59 of The TRADE,
found that brokers had begun to
outpace their banking counterparts
when it came to satisfying the
needs of their long-only buy-side
clients in almost every facet of
performance.
While there are clear areas of
differential performance among
various algo providers, the overall
showing from the 2019 survey is
contingent of hedge fund firms
in this year’s survey, with the
total average score across all algo
providers rising to 5.72, a signifi-
cant increase on the total average
of 5.47 in 2018 and even above the
pre-MiFID II score of 5.68 in 2017.
This would seem to indicate that
for algorithmic trading, both from
the perspective of the provider and
the end user, MiFID II amounted
to a bump in the road that offered
a chance to review where im-
“For algorithmic trading, both from the
perspective of the provider and the end user,
MiFID II amounted to a bump in the road that
offered a chance to review where improvements
could be made to the process and product.”
largely positive, as the industry
moves further away from regula-
tory compliance concerns brought
about by MiFID II and reprioritises
quality of execution and secur-
ing better outcomes for the end
investor.
This trend is once again evident
from responses provided by the
78 // TheTrade // Summer 2019
provements could be made to the
process and product. And it would
seem those improvements are now
being recognised.
Figure 1 shows a continuation
of the trend seen in the long-only
results of this year’s survey, with
increased year-on-year scores in all
but one of the functional categories
under evaluation. While there were
more noticeable fluctuations in
this year’s scores in comparison to
those recorded in 2017, the trend
is more positive, with some areas
showing market improvement
to the pre-MiFID II era such as
execution consulting and price
improvement.
The highest score achieved in
this year’s hedge fund algo survey
was in the customer support
category (5.92), closely followed
by anonymity (5.81), ease of use
(5.81) and improve trader produc-
tivity (5.80). There was no area
of performance that received a
score lower than 5.50 – the lowest
being 5.57 for price improvement –
which indicates a good overall level
of satisfaction among hedge funds
towards their algo providers.
The areas of performance that
showed the greatest year-on-year
improvements were in the cost (up
0.44 from 2018), improve trader
productivity (up 0.41 from 2018),
price improvement (up 0.35 from
2018) and customisation (up 0.35
from 2018). The two new perfor-
mance categories introduced in