A new report predicts algorithmic trading will move into the credit and commodity markets within the next decade, but there is work to be done to ensure success.
The mushrooming market for algorithmic trading will expand into the markets for credit default swaps (CDSes), corporate securities and commodities, according to a new report from Datamonitor, a London-based analyst firm. The report, "Trading System Transformations in Global Markets," predicts that the next generation of algorithmic trading models will penetrate the credit and commodity markets by 2015.
Nii Barnor, an analyst at Datamonitor, says Bank of America, Citi, Goldman Sachs, Lehman Brothers and Morgan Stanley are leading the charge in the evolution of algorithmic trading to meet the demands of traders seeking ever-faster connectivity to new markets. "As the market becomes more standardized, it is expected that algorithms will move into the realm of CDSes and corporate securities. In addition, as commodity exchanges become more electronic, fluctuations in prices will push the demand for mathematical solutions to quickly capitalize on opportunities," the report states.
Datamonitor estimates that global spending on algorithmic trading on derivatives, foreign exchange and commodities will more than double from $31 million in 2006 to $79 million in 2009. However, that figure is still dwarfed by current global spending on algorithmic trading for equities trading, which reached $176 million in 2006.
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Source:http://www.watersonline.com
Publish Date:01-March-2007
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