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2012 Algorithmic Trading Survey

2012 Algorithmic Trading Survey

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Published by Smith Kim
The Trade
The Trade

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Categories:Types, Research
Published by: Smith Kim on Jan 28, 2013
Copyright:Attribution Non-commercial

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07/19/2013

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The 2012 AlgorithmicTrading Survey
Recognising excellence in the delivery of algorithmic trading solutions
Featuring 
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Market review 
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Broker roll of honour 
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Market feedback 
Based on 750 buy-side evaluations
 
Market review
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 Arms raceintensifies
Illustration: iStockphoto
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The 2012 Algorithmic Trading Survey
O
ver the past 12 months,the response of thebuy-side to low volumesand periods of high volatili-ty has been crystal clear.The answer to tougher con-ditions isn’t scaling back  your providers. It’s algorith-mic proliferation – makingsure you have the rightweapons at your disposal,from wherever you can getthem.This year, The TRADE’s5th annual AlgorithmicTrading Survey shows trad-ers using more algorithmsfrom an increased numberof providers for a lot morevolume. Our most compre-hensive survey yet bringsover 750 individual viewsfrom more than 150respondents located inevery major trading centrearound the globe.
Wy I’  biv 
Even though budgets ontrading desks are tight,from IT-savvy quant-driv-en algo ‘natives’ to old-school traditionalists, itseems almost everyone isusing algorithms andthey’re engaging withmore providers than everbefore.But when it comes towhy they select algos fromthe available executionoptions, trader motivesaren’t budging, and the topthree reasons have
More algos, more oftenfrom more providers
When the going gets tough, buy-side tradersturn to their algos, The TRADE’s 5th annualAlgorithmic Trading Survey reveals.
 
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remained the same from2011 to 2012. This year, themost popular reason forusing an algo remained thedesire to reduce marketimpact, increasing margin-ally to 13.6% from 13.3% asthe buy-side’s primary need. Minimising implicitcosts is one of the trader’score objectives of course,but the desire to reducemarket impact is only intensifying at a time whenthe buy-side is executing anincreasing proportion of trades in the dark. Oncemore, the second mostimportant reason for buy-siders to use algos was easeof use (12.1%, slightly down from 12.3%), fol-lowed by increased traderproductivity (11.1% downfrom 11.3% in 2011).Consistency of executionperformance remained aconstant reason for tradingelectronically, up marginally to 10.7% from 10.5% in2011, while slightly morerespondents recognised theimportance of using algosto enjoy greater anonymity in trading.But in 2012, fewer trad-ers opted for algos for rea-sons of price improvement.Just 7.8% – down from8.3% in 2011 – believedtrading via algos wasimportant to find betterprices.
Market review
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The 2012 Algorithmic Trading Survey
01234560123456Internal crossingResults vs pre-trade estimatesEase of useCustomisationPrice improvementAnonymitySpeedCostExecution consistencyReduce market impactImprove trader productivity
 Average scores20122011Key
7 = Excellent 1 = Very weak
FIgure 1: ratIng oF algorIthm perFormance
Source of all charts: The TRADE Annual Algorithmic Trading Survey 
Match pre-trade estimates 2.2%Internal crossing 10.4%Ease of use 12.1%Customisation 7.4%Price improvement 7.8%Anonymity 10.8%Speed 5.4%Commission rates 8.6%Execution consistency 10.7%Reduced market impact 13.6%Trader productivity 11.1%
FIgure 2: reasons For usIng algorIthms
Traders are usingmore algorithmsfrom an increasednumber of providersfor a lot more volume

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