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Figure 4 : Number of providers used (% of responses )
Provider count
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2024
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$ 1 and $ 10bn have recorded a slight decrease – from 3.88 in 2023 , down to 3.04 this year ( 2024 ). This is the largest decline seen in figure 3 . This could be due to consolidation , leading to fewer distinct providers in the market , as well as increased in-house development , in which firms might be shifting towards developing their own proprietary algorithmic trading strategies in-house .
Large , long-only managers , with AUMs of more than $ 50bn have also seen a slight decline . Back in 2023 , these firms reported using an average of 4.99 providers , but this year it has now dropped to 4.77 , although this would still round up to firms using 5 providers on average . This means that firms with AUM of between $ 10- $ 50bn use the most providers , averaging out at 5.14 . This is the highest number
29
11
13
of reported providers being used in the last three years . What will be interesting to watch over the next year is whether these firms continue to add more providers or if this number plateaus throughout the rest of 2024 . Given the positive attitude our respondents seem to be showing , it may be safe to assume we will be beginning to see these numbers rise across the board , although perhaps more so for the firms with smaller AUMs .
Of course , if you remove the filter of AUM , the data shows a very different picture ( figure 4 ). Around 40 % of buy-side traders reported using five or more providers . Although interestingly , the second highest holding is 29 % of traders reportedly only using one provider . It seems there is quite the split between our respondents who show provider
7 loyalty with a commitment to only one , and those who believe that diversification is the way forward . With the rising numbers of long-only managers who are looking to have exposure to five or more providers , having increased marginally since 2023 , perhaps we will see those with single provider loyalty drop ? Although this number has remained largely unchanged over the past three years .
When it comes to the distribution of algo usage by value traded , as you can see in figure 5 , there has been a decline in the number of respondents who report to using algorithms for over half of their trading by value . Those who traded between 40 % and 80 % of their portfolio value have reported a slight decrease . Most notably those who traded between 60 % - 70 %, which has fallen by almost 10 %.
This is in line with the volume of trades made by algos . While the majority of buy-side traders report using algos to make 50 % - 60 % and 70 % -80 % of their trades , the largest result is that of over 80 %. Not only do traders use algos to carry out the majority of their value traded , but they also use algos to carry out over 80 % of the actual number of trades .
This jump is significant . Last year , only 15 % of long-only managers reported that their value trades were carried out by algos . This year , this has jumped almost 10 %. This could be linked to technological advancements making algorithmic trading more accessible and efficient , allowing traders to execute complex strategies with greater speed and accuracy , thus driving adoption .
While we have explored the value of trades made by algorithm , and the volume of
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