Imported from previous forum
20 June, 2007 - Take up of advanced electronic trading formats, such as algorithmic trading and direct market access, has grown to the point where firms not adopting these processes may be left behind, according to an industry expert.
Alex Walker, vice president (international) at TNS Financial Services made the statement after the London Stock Exchange said it expected the number of bargains put through its electronic order book SETS to increase by more than 35 per cent this year.
He said: “Exchanges worldwide have experienced surging trading volumes over the last year, fuelled by a substantial increase in the take up of algorithmic trading and DMA. Buy and sell-side firms must consider adopting these advanced trading processes if they hope to maintain or enhance their market position.
“Implemented as part of a wider electronic trading strategy, they offer significant advantages in terms of speed, cost, depth of liquidity and anonymity.”
DMA tools give buy-side traders access to liquidity pools and multiple execution venues directly, without intervention from brokers’ trading desks.
Mr Walker said: “DMA can improve execution speeds and prices, give more control, enable new trading strategies, reduce commissions and ensure smart order routing.”
Algorithmic trading uses complex computer systems to trade financial instruments based on pre-set parameters. It provides the same benefits as DMA, but also helps to reduce volatility.
Mr Walker said: “These advanced processes will also help firms comply with MiFID, as demonstrating best execution depends on speed, as well as factors like price and security.
“Easy access to a range of technologies, including secure extranets, means these tools are now at traders’ fingertips. Issues such as latency, access to execution venues, multiple broker access, bandwidth and reliability are no longer barriers to implementing DMA and algorithmic trading.
“Financial institutions using these are pulling away from their counterparts, who should act now to ensure they are not left behind.”
TNS provides a Secure Trading Extranet connecting over 1,000 financial community end-points, representing more than 450 buy and sell-side institutions, market data and software vendors, exchanges and alternative trading venues. It boasts over 100 points of presence, covering 30 countries globally.
Financial institutions using TNS’ network can exchange a variety of trade-related messages, including indications of interest, order routing and trade executions.
For further information about TNS log onto www.tnsi.com