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Add periods of decreased liquidity and increased volatility to the mix , traders have progressively sought algorithmic strategies and automated solutions for consistent execution in volatile products , and when targeting cash settlement periods , for example .
It ’ s not just JP Morgan that is doubling down on efforts in futures algo trading . In January , rival investment bank Citi rolled out a suite of execution algorithms , including its flagship Arrival strategy , for futures markets across all major exchanges in the US , Europe , and Asia Pacific .
In contrast to JP Morgan , the electronic traders at Citi handle all of the algo customisations on behalf of clients . Head of EMEA futures electronic execution at Citi , Gordon Ball , said at the time clients don ’ t want to enter numerous parameters to execute an order . He added : “ the complexity of operating an intelligent algorithm and fine-tuning customisations sits with us , so our clients can focus on their overall investment and trading objectives ”.
Elsewhere , a start-up founded by former global head of trading at AQR Capital Management , Hitesh Mittal , launched its own suite of execution algorithms in early 2020 that aims to reduce costs for the buy-side with customised and high-performance strategies . In December , BestEx Research secured $ 5 million in funding as it prepares to roll out its algos in futures markets .
Amid the arms race in this space , JP Morgan ’ s Ward predicts the pace of fixed income futures algo trading adoption , particularly customised algos , will continue apace in 2021 . It remains a significant focus at JP Morgan as different buy-side clients are also now using algorithms to trade futures .
In the past few years , the type of buy-side client seeking algorithmic execution has shifted from being a relatively small number of large hedge fund clients to the more traditional managers , including pension funds , asset managers and insurance companies .
“ Five years ago , there were pockets of interest in executing this way , depending on the specific trader or firm ’ s appetite . It ’ s now become far more mainstream , driven by broader electronification in fixed income markets as well more investment firms adopting more explicit execution benchmarks ,” Ward concludes .
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