[ A L G O R I T H M I C
T R A D I N G
Fig 4: Number of providers used (% of responses)
S U R V E Y ]
2015
2016
2017
33.3
23.4
1-2
34.0
26.2
22.1
3-4
31.1
40.5
5+
54.5
34.9
0 10 20 30 40 50 60
24.7% in 2015 down to just 4.8%
in 2017, almost the exact oppo-
site of the higher bracket. This
suggests that, those firms which
were already heavy users of algos
have simply become even fonder
of them and shifted more trading
into the automated space. Low-
er-down the scale, only the sub-5%
category reveals any interesting
trend, having grown from 3.9% in
2016 to 9.4% this year, though this
is still well below the 13.3% seen in
2015. Still, it seems some firms may
be cutting back on the automated
trading, perhaps due to a reali-
sation that algorithmic trading
does not always produce the best
results, especially for those with
more complex needs.
And finally we come to Fig 6,
which shows the percentage of
firms using particular algos. Straight
off the bat we can see that partici-
pation-based algos have continued
their fall in popularity seen last
year, dropping down to 52.9%, well
below the 79.1% seen in 2015. Last
year’s most popular choice, the dark
liquidity seeking algo, continues to
lead the field this year with only a
small decline from 81.9% in 2016 to
79.9% this year. It is unclear what
the impact of dark pool caps in
Europe will have on this. While it
could push more firms to execute
large-in-size orders (because
they’re excluded from the dark pool
cap) that are normally not auto-
mated, it could also increase the
importance of being able to tap into
dark liquidity when it is available.
TWAP’s popularity has fallen
over the past couple of years and
is now used by just 16.3% of firms,
while VWAP staged a recovery
after falling from 50.2% in 2015 to
43.7% last year, it’s now back up
to 48.7% meaning this particular
strategy seems to be relatively
adaptable to changing market
conditions.
This year’s survey definitely
paints an interesting picture and
gives some insight into how 2017
- which is bound to be dominated
by discussion of MiFID II in both
Europe and other parts of the
world - is seeing changing attitudes
towards automated trading. How-
ever, readers may already be keen
to know what will be discovered in
next year’s survey, when the new
rules will be in force and the true
consequences for buy-side trading
will begin to become apparent.
Issue 51
TheTradeNews.com
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