Electronic trading of fixed income and foreign exchange products has increased significantly over the past two years, encouraging a greater adoption of multi-asset trading strategies by institutional investors.
The findings come as part of a study into electronic trading by Barclays Capital, the investment banking division of the UK's Barclays Bank.
The survey, which questioned 1,300 institutional investors, found that the average respondent now executed 77% of trades electronically across all asset classes, compared to below 50% in 2006.
The rise was found to be particularly significant for FX, where electronic trading accounted for 68% of volumes in 2010, compared to 47% in 2008. The proportion of fixed income trading done electronically doubled over the last two years to 54% in 2010, from 27% in 2008.
Furthermore, 85% of respondents indicated that they are responsible for multiple asset classes – compared to around 50% when the survey first started in 2005 – which the study suggests is indicative of a shift towards greater levels of cross-asset trading.
According to Holden Sibley, head of e-distribution, Americas at Barclays Capital, “the recent financial crisis really highlighted the interrelated nature of many asset classes, and portfolio managers have now started to recognise the opportunities that can arise from these correlations”.
He adds that the growth of multi-asset strategies has coincided with the evolution of electronic trading. As such, he claims that portfolio managers at hedge funds now have the tools to manage cross-asset execution and institutions can now control secondary trading activity – such as hedging – more effectively.
“Traders are historically less concerned about this secondary activity as it not part of their alpha generation strategy, but electronic trading gives them more control and visibility over this process,” added Sibley.