[ A L G O R I T H M I C
T R A D I N G
users, suggesting that the buy-side
is looking for technology that sim-
ply works and allows them to con-
centrate on their daily workloads.
However, it is the consistency of
execution performance that con-
tinues to be the overriding reason
for buy-side firms to use algos as
part of their trading operation,
accounting for 11.25% of responses
this year, perhaps unsurprising giv-
en the desire for reliability during a
year of regulatory upheaval.
There were new factors included
within this section of the algo sur-
vey this year, with the removal of
internal crossing from the reasons
for using algos and the addition of
algo monitoring capabilities (ac-
counting for 7.64% of responses),
data on venue/order routing logic
or analysis (4.14%) and flexibility
S U R V E Y ]
consistent use of the number of
algo providers as last year (2.20
and 4.45 respectively); clearly
those on the buy-side with the
largest pool of resources to work
with are not in any hurry to reduce
their options when it comes to
algorithmic trading.
The largest decrease in algo pro-
viders was among buy-side firms
managing $0.5-1 billion, which
declined from 2.50 to 1.43 year-
on-year, while those in the $1-10
billion and $10-50 billion brackets
recorded year-on-year decreases of
0.74 and 0.53 respectively. Smaller
asset managers are also reducing
the number of algo providers they
use, hardly surprising given the
strain on operating and technology
budgets continue for the buy-side.
The evidence for algo provider
and sophistication of smart order
routing (7.59%).
The expected consolidation of
algo providers and brokers from the
buy-side following the introduction
of MiFID II has yet to materialise,
as seen in Figure 3. Last year’s
survey found that long-only asset
managers were actually increasing
the number of algo providers they
engaged with despite their relative
budgets, and although this trend
may have been reversed this year,
it’s hardly the strong cutbacks that
were predicted.
On average, long-only firms en-
gage with between two and three
algo providers, regardless of AuM,
a marginal decrease on last year.
Only those long-only respondents
managing either $0.25-0.5 billion
or more than $50 billion recorded
Figure 4: Number of providers used (% of responses)
Long-only 2019
Long-only 2018
Long-only 2017
28.20
18.66
1
32.10
17.95
15.67
2
13.68
14.36
3
13.43
17.37
10.26
12.68
4
11.58
29.23
39.55
>5
25.26
0.00
5.00
76 // TheTrade // Spring 2019
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