May 29, 2024
Ict

Algorithmic Trading is Transforming algorithmic Capital Markets Growth globally

The algorithmic trading market is poised to experience double-digit growth through 2031 driven by increasing digitization. Algorithmic trading uses sophisticated software programs to analyze market conditions and execute trades automatically via high-speed computer systems. It allows traders and investors to generate profits at very high speeds with minimal human intervention. Algorithmic trading programs can interpret diverse datasets, and place trades accordingly in milliseconds across multiple exchanges and asset classes around the world. The approach brings efficiency to trading activity and liquidity to capital markets.

The global algorithmic trading market is estimated to be valued at US$ 21,211.7 Mn in 2024 and is expected to exhibit a CAGR of 10% over the forecast period 2024 to 2031.

Key Takeaways

Key players operating in the algorithmic trading market are 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. These major players are focusing on developing innovative solutions and strategies to strengthen their presence in the market. For instance, in 2022 AlgoTrader partnered with Macquarie Group to provide its clients with algorithmic trading capabilities.

The rising demand for algorithmic trading stems from benefits such as high processing speed, analytical capabilities, minimal latency, and low implementation and transaction costs. Algorithmic models help traders secure profitable trades that humans may miss due to slower decision-making or behavioral biases. This is driving adoption across hedge funds, investment banks, proprietary trading firms, and asset management companies.

Globally, North America dominated the algorithmic trading market in 2024 due to high penetration of algorithmic solutions among institutional investors. However, Asia Pacific is expected to witness the fastest CAGR during the forecast period with growth in algorithmic adoption in major countries like China and India. Key players are also expanding their geographical footprint in high potential markets for long-term sustainable gains.

Market Key Trends

One of the key trends in the algorithmic trading market is the integration of artificial intelligence and machine learning capabilities. Advanced algorithms are being developed using AI techniques like deep learning and neural networks to derive actionable insights from vast volumes of structured and unstructured data. This allows trading models to self-evolve and optimize decisions over time without reprogramming. Other influential trends include growing application of algorithmic trading in cryptocurrency exchanges, influx of trading APIs and software development kits, and increasing use of cloud-based and serverless algorithmic strategies for flexibility and scalability. These trends will significantly boost the evolution of automation and high-frequency digital trading technologies going forward.
Porter’s Analysis
Threat of new entrants: High capital requirements and presence of dominant players pose a threat to new entrants.

Bargaining power of buyers: Buyers have low bargaining power due to high switching costs and availability of substitutes.

Bargaining power of suppliers: Suppliers hold higher bargaining power due to requirement of specialized skills and technologies.

Threat of new substitutes: Emergence of alternative trading strategies poses a threat for new substitutes.

Competitive rivalry: Fierce competition among existing players leads to frequent new product development and pricing wars.

The United States accounted for the largest share of the algorithmic trading market in 2024. This is mainly attributed to the presence of well-established capital markets in the country and technological advancements supporting algorithmic trading strategies. Furthermore, the increasing focus of financial institutions in the US to comply with regulatory policies and reduce transaction costs is also contributing to the growth of algorithmic trading.

Asia Pacific is projected to grow at the highest CAGR during the forecast period owing to the increasing adoption of automated trading practices across emerging economies such as China, India, Taiwan and South Korea. Government initiatives promoting financial inclusion and expanding global footprint of trading firms is expected to fuel the demand.

*Note:

  1. Source: Coherent Market Insights, Public sources, Desk research
  2. We have leveraged AI tools to mine information and compile it