Sentiment among long-only managers towards their algorithmic trading providers is more positive than ever and set to translate into ever-increasing adoption of this strategy, according to data from The TRADE.
The turnabout to a more optimistic sentiment – demonstrated by upticks in ratings from buy-side traders – follows on from the downward trends of 2023 highlighted in The TRADE’s Algorithmic Trading Survey 2024.
Ease of use took the top spot when it came to the principal motivation behind why buy-side traders use algorithms, with reducing market impact and consistency of execution following closely behind.
Read more – Beyond the Data: Higher speed and lower latency fastest growing priorities for algo users
Those surveyed also highlighted customer support as a top priority when it came to algo providers. These positive perceptions represent a promising sign for future adoption.
In 2023, only 15% of long-only managers confirmed that their value trades were carried out by algos, however the latest findings show an increase of almost 10% for 2024.
Key contributing factors include the continued technological advancement of the industry facilitating increased access to algorithmic trading. Subsequently, with these more efficient processes, comes increased adoption across the space.
Speaking to The TRADE earlier this year, Chris McConville, global head of execution services and trading at Kepler Cheuvreux Execution Services (KCx), highlighted that despite continued innovation, the intelligent design and execution of algorithms and SORs, are the priorities.
Read more – Algorithmic trading: Smarter than ever?
Notably, when it came to how traders are actually measuring the performance of their algorithms, the majority confirm that VWAP transaction cost analysis (TCA) is the preferred method (34%), closely followed by implementation shortfall TCA (32%) and liquidity capture (20%).
The findings were based on 2,222 respondents across 35 algo providers with only the evaluations from clients who indicated that they were engaged in managing long-only strategies included. Only verified participants’ responses were included.