[ A L G O R I T H M I C T R A D I N G S U R V E Y ]
Traders turn to tried and tested algo strategies in market volatility
As the percentage of funds trading via algos continued to rise , the longonly results of The TRADE ’ s Algorithmic Trading Survey 2021 reveal that traders relied on tried and tested VWAP and TWAP strategies during the market uncertainty .
2020 was a wild year for global equity markets and that is putting it mildly . After investors watched on in horror last March as the dramatic sell-off in markets seemed to spell financial Armageddon , it did not take too long for central banks and governments to realise the seriousness of the situation . An enormous program of bond-buying and rate cuts set the stage for a series of record-breaking rallies and heightened equity market activity as companies looked for financing and restructuring solutions . Despite an unprecedented year-long restriction in economic activity , markets are now poised for a global recovery with investors bullish on the prospect of strong growth in business confidence and corporate earnings globally . The investments in technology and software that the financial services sector has made largely paid off through the relative seamlessness with which the industry has handled the turmoil of the past year . Just as the pandemic has underscored the centrality of large technology companies in the modern economy , it has been a reminder of the importance of sophisticated digital solutions for successful investment management strategies . In particular , the volatility , best execution requirements and the working from home environment of the past 12 months has created a fertile environment for algorithmic trading . In this year ’ s survey of long-only funds the average score of respondents is 5.81 – an increase from both the 2020 score ( 5.71 ) and the 2019 score ( 5.74 ). In 2021 , the most impactful features of algorithms are ease of use , customer support and services , dark pool access , execution consistency and increased trader productivity ( Figure 1 ). Following from high scores of 5.96 and 5.92 respectively in the 2020 survey , support services and ease of use both scored 6.01 in this year ’ s survey . It is interesting to see ease of use increase its score year-on-year over the past four years , underlining the importance of usable and streamlined technology in the modern trading environment . Two categories in this year ’ s survey recorded the joint highest year-onyear increase in their score , anonymity and algo monitoring . Both categories received an increase of 0.17 , putting anonymity at 5.89 and algo monitoring at 5.72 . Increase in trader productivity marks the second highest jump in score , having increased by 0.16 from 5.80 to 5.97 . This jump shows the growing role that algos play in boosting the performance of traders . While all scores in 2021 were up from 2020 , dark pool access recorded the smallest increase at only 0.02 . While dark pool access remains a highly rated feature of algos , the push from European regulators to shift trading onto lit venues means that long-only firms are increasingly looking for other features in addition to dark pool access . Respondents ’ reasons for using
72 // TheTRADE // Spring 2021