[ I N D E P T H | F U T U R E S A L G O T R A D I N G ]
Since 2016 , futures volumes traded via algos at JP Morgan has increased 40 % year-on-year . In fact , algos now comprise of almost 20 % of the bank ’ s total futures trading flow , up significantly from roughly 4-5 % in 2016 and 2017 , figures seen by The TRADE have revealed .
The period of intense volatility in 2020 due to the global pandemic played a key role in the cumulative buy-side adoption of futures algos as traders became more accustomed to on-screen execution and liquidity .
“ When liquidity is harder to source and there is more volatility , execution performance becomes challenged ,” Ward explains . “ Clients are driven to look at the problem areas in executions and that ’ s when we consult with them to figure out ways to bring in that performance . Maybe they should consider trading at higher volume at the open or close , or perhaps sitting out the first five minutes on the cash open because of the noise . All of that we can customise for them .
“ I think the more challenges clients see in execution , the more opportunity there is for us to come
" Clients are driven to look at the problem areas in executions and that ’ s when we consult with them to figure out ways to bring in that performance ."
in and help them , and the solution is increasingly the customised algorithm .”
Customised algorithms have become particularly popular with traders in 2020 and in recent years . Volumes on customised algos at JP Morgan have roughly tripled in each of the past three years , alongside a 21 % increase in the number of custom algos in 2020 to almost 50 customisations , up from close to zero in 2017 .
The bank ’ s flagship liquidity-seeking algorithm , known as Aqua , is the most common foundation for
60 // TheTRADE // Spring 2021