Single-stock trading and program trading in US equities are becoming increasingly interlinked, as advances in algorithmic trading blur the lines between the two.
This overlapping distinction has been attributed to the rise of electronic execution for program trades and the increasingly sophisticated algorithms for single-stock trading, which represent a greater shift towards e-trading.
According to a study conducted by Coalition Greenwich, program trades accounted for approximately $79 billion in daily trading activity in 2024, and nearly half (46%) of these trades were executed electronically, an increase of 35% in two years.
The firm has said that buy-siders leveraging existing single-stock algorithms instead of implementing program-specific strategies has also contributed to this increase.
“Today’s traditional single-stock algorithms are savvy are enough to be used to execute baskets of orders as single programs,” said Jesse Forster, head of equity market structure and technology at Coalition Greenwich.
“Between workflow innovation and good old-fashion inflation, the definition of program trading itself is now in flux.”
This push towards electronic execution and advanced algorithms has meant that there is a greater buy-side focus on the choice between high-touch and low-touch execution, with the aim of finding the method with the best trade outcome.
Many buy-side traders use broker sales traders to offer guidance on these options, and for more than 60% of them, performance and minimising market impact are the driving force in the decision-making process.
Forster added: “While electronic trading is becoming more prevalent, high-touch sales traders still play a vital role in program trading, particularly for complex orders or those involving non-U.S. constituents.
“Buy-side traders value the expertise and risk management capabilities of high-touch sales traders.”
Although this growth in the program trading space may offer challenges to smaller or regional brokers competing with larger banks, it is expected that many firms will build on this development and begin innovation and investments in next-generation program-specific strategies.