Seattle, WA -- (SBWIRE) -- 09/24/2019 -- Algorithmic trading, also known as algo trading, automated trading, or black box trading, is a programed process, which follows a specific set of instructions (an algorithm) for placing a trade in the stock market. The technology aids in generating profits at a high speed and frequency, otherwise impossible for a human traders. Algorithmic trading is used in the financial market in various countries such as the U.S., India, the U.K., and South Korea. Some of the features of algorithmic trading include accuracy, exceptional speed, and liquidity, which are expected to boost growth of the algorithmic trading market over the forecast period.
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Increasing use of cloud-based solutions, services, and cloud computing for algorithmic trading is expected to boost the market growth during the forecast period (2018-2026). Traders use cloud services to check backtest, trading strategies, and run-time series analysis while executing trade. Cloud computing helps to build dedicated data centers for services such as data storage, backup and recovery, data management, and networking. This makes renting space over cloud more convenient compared to developing software/hardware infrastructure. According to Coherent Market Insights, the value of cloud computing market is expected to increase from US$ 58 billion in 2013, to US$ 191 billion by 2020. Moreover, professional cloud services market is expected to increase from US$ 15.36 billion in 2017, to US$ 41.59 billion by 2023. Therefore, increasing use of cloud-based services is expected to boost growth of the algorithmic trading market.
Increasing demand for AI-based services in financial sector is another factor contributing to growth of the market. Use of AI in algorithmic trading can aid in adopting market conditions and making informed trade decisions. Some of the major trading companies that use AI for selecting stocks include Blackrock, Renaissance Technologies, and Two Sigma. According to Coherent Market Insights, in 2018, about 37% of the financial institutions in India invested in AI-focused technologies and around 68 % plan to adopt the technology in the near future. Therefore, increasing use of AI in for trading and other purposes in the financial sector is expected to boost growth of the algorithmic trading market over the forecast period. Institutional asset managers also use non-equity trading algorithms, which is also expected to contribute to the market growth.
Increasing disposable income has led to a surge in trading activity, which is expected to boost growth of the algorithmic trading market. According to India Brand Equity Foundation (IBEF), the total rural income in India was around US$ 572 billion in 2018, which is projected to reach to US$ 1.8 trillion by 2021. India's rural per capita disposable income is estimated to witness a CAGR of 4.4% to reach US$ 631 by 2020.
On the basis of region, algorithmic trading market is segmented into North America, Europe, Asia Pacific, Latin America, Middle East, and Africa. North America algorithmic trading market contributed the largest market share in 2018. This is due to strong technological advancements and considerable application of algorithm trading among various end-users such as banks and financial institutions, across the region. According to SelectUSA, financial markets in the U.S. are the largest and most liquid in the world. In 2017, finance and insurance sector represented 7.5% (or US$ 1.45 trillion) of U.S. gross domestic product. For instance, in April 2018, BMO Capital Markets, the investment and corporate banking arm of BMO Financial Group, announced multi-year strategic partnership with Clearpool Group, a provider of advanced electronic trading software. Under this agreement, Clearpool will provide BMO with a fully customizable algorithmic management system (AMS) infrastructure to execute Canada equities for BMO's institutional clients.
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Moreover, in April 2016, the U.S. Securities and Exchange Commission (SEC) approved a rule proposed by the Financial Industry Regulatory Authority (FINRA) to reduce market manipulation that requires algorithmic trading developers to register as security traders.
Key Players in the Global Algorithmic Trading Market:
Some of the key players operating in the 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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