April 24, 2024

Algorithmic Trading Market is gaining traction in the FinTech Trends of 2031 owing to High-frequency trading

The algorithmic trading market comprises computer programs that are capable of initiating orders to buy or sell securities or currencies based on quantitative analysis and pre-determined parameters. The programs autonomously generate trade orders based on the underlying analytics and algorithms and eliminate human discretion while placing trades. Algorithmic trading allows for high-frequency and high-volume trades in milliseconds, which is useful in continuous settlement and trading. It reduces trading costs, optimizes trade execution based on various market data, and provides opportunities to profit from small, short-term price changes.

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 of 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.

Key players: Key players such as AlgoTrader GmbH, Trading Technologies International, Inc., and Tethys Technology, Inc. offer comprehensive algorithmic trading solutions and platforms. These platforms analyze market data in real-time and execute trades based on predefined rules and machine learning models.

Growing demand: There is growing demand for algorithmic trading solutions from proprietary trading firms, investment Banks, hedge funds, and other institutional investors. These organizations aim to benefit from high-frequency trading and derive alpha from small price fluctuations.

Global expansion: Major algorithmic trading solution providers are focusing on global geographical expansion. They are targeting emerging markets in Asia Pacific and Latin America owing to growing financial technologies adoption. Local partnerships provide an understanding of regional regulations and customize solutions.

Market key trends

High-frequency trading: High-frequency algorithmic trading techniques are gaining adoption to profit from very small margins across millions of shares within milliseconds. It often uses complex algorithms and supercomputers for ultra-low latency. This trend is helping institutional traders maximize profits.

Machine learning: Machine learning and artificial intelligence are increasingly used to power the algorithms. These self-learning models can analyze massive real-time and historical data to make more accurate buy/sell decisions. It is improving predictive capabilities and helping identify trading opportunities.

Evolve or be replaced: Firms leveraging algorithmic trading need to constantly update algorithms, optimize execution, and stay ahead of the competition. Stagnant or older algorithms are at the risk of being replaced by evolving solutions offering better performance. This makes algorithm evolution a critical trend.

Porter’s Analysis

Threat of new entrants: Low entry barriers to the algorithmic trading market makes it easy for new companies to enter. However, established players have significant resources and client base.

Bargaining power of buyers: Buyers have moderate bargaining power due to availability of alternatives. However, proprietary trading algorithms give an edge to certain established vendors.

Bargaining power of suppliers: Software developers and technology providers have moderate-to-high bargaining power due to specialized skills. However, established algorithmic trading companies have in-house development capabilities.

Threat of new substitutes: Emerging technologies like artificial intelligence, machine learning, and advanced analytics pose a threat of substitution.

Competitive rivalry: Intense competition among vendors to offer low latency, high throughput, and customized algorithmic trading solutions.

Geographical Regions

North America currently holds the largest share in the algorithmic trading market, both in terms of value and volume, primarily due to strong presence of vendors and financial institutions. The USA and Canada are major countries accounting for over 50% of global market.

Asia Pacific is expected to emerge as the fastest growing regional market during the forecast period, owing to rapid growth of financial markets in countries like China, India, and Japan. Establishment of trading hubs and adoption of emerging fintech solutions are driving the adoption of algorithmic trading in Asia Pacific.

*Note:

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