According to Coherent Market Insights, global algorithmic trading market was valued at US$ 9,297.24 million in 2017, and is projected to exhibit CAGR of 10.1% over the forecast period (2018 “ 2026).
Key trends and Analysis of the Global Algorithmic Trading Market:
Among algorithmic trading market applications, hedge funds segment is expected to exhibit the highest growth rate during the forecast period. Hedge funds are formed by the partnership between different investors where the fund pools assets from accredited individuals or institutional investors is used to leverage it to borrow funds and use various strategies (such as derivatives, futures etc.) to earn active returns off both local and international markets. For instance, in 2017 in the U.S., S&P 500 Index reached a three year high up 19.42% and the top performing traditional fund (SH Capital Partners) posted 234.1% returns. Over the same period, Silver8 Partners and Global Advisors Bitcoin Investment Fund achieved 771% and 330.1%, returns respectively. Both these algorithmic trading instances are automatically traded however, differ on specific strategies.
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Growing demand for market surveillance is expected to accelerate growth of the algorithmic trading market. Traders keep track on their trading activities and investment portfolio by using market surveillance technology. Key players are focusing on developing new solutions and create effective marketing strategies for market surveillance. Therefore, many companies use algorithmic trading to minimize their transaction cost and market risk.
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Emergence of AI in financial service sector is expected to be a major factor aiding in growth of the algorithmic trading market. Companies such as Sentient, Clone Algo, Alpaca, Walnut Algorithms, Binatix, and Aidyia are using AI for algorithmic trading strategies. For instance, Sentient Company has built trillions of AI traders and then distilled them into a single AI trader that they are considering to spin out as a separate company.
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Key Market Takeaways:
- The global algorithmic trading market is projected to witness CAGR of 10.1% during the forecast period (2018 “ 2026), owing to increasing adoption of IoT enabled devices, globally.
- North America algorithmic trading market accounted for the largest share in 2017, and it expected to retain its dominance during forecasted period (2018-2026). This is due to strong technological advancements and considerable application of algorithm trading in various applications such as banks and financial institutions across the region. Algorithmic trading is responsible for around 60-73% of all U.S. equity trading. According to Select USA, financial markets in the U.S. are the largest and most liquid in the world. In 2017, finance and insurance represented 7.5% (or US$ 1.45 trillion) of the U.S. gross domestic product.
- Asia Pacific is expected to offer highest growth opportunities for market players during the forecast period, owing to rising adoption of algorithmic trading solutions among end-users. Moreover, growing trade in developing economies is projected to contribute to the development of overall algorithmic trading market in Asia Pacific. For instance, SEBI allowed algorithmic trading in India in April 2008 by opening up direct market access to the institutions. Since then, it has grown rapidly across the various asset classes. In April 2018, SEBI announced plans for new norms to make algorithmic trading more accessible to investors. Moreover, according to CXO of QuantInsti, algorithmic trading potentially helps traders execute orders faster, expand strategy portfolios by using more advanced quantitative tools and remove human errors that often affect the performance of trading strategies. Algorithmic and quantitative trading strategies are getting more popular, as it can increase the likelihood of success with the backing of the statistical rigor. Close to 50 % of the overall exchange volumes in the F&O (Futures and Options) segment happen through algorithms.
- Some of the major players operating in the algorithmic trading market include AlgoTrader GmbH, Trading Technologies International, Inc., Tethys Technology, Inc., Tower Research Capital LLC, Lime Brokerage LLC, InfoReach, Inc., FlexTrade Systems, Inc., Hudson River Trading LLC, Citadel LLC, and Virtu Financial.
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About Coherent Market Insights:
Coherent Market Insights is a prominent market research and consulting firm offering action-ready syndicated research reports, custom market analysis, consulting services, and competitive analysis through various recommendations related to emerging market trends, technologies, and potential absolute dollar opportunity.
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