The global Algorithmic Trading Market is estimated to be valued at US$ 2.03 Bn in 2022 and is expected to exhibit a CAGR of 7.2% over the forecast period 2023-2030, as highlighted in a new report published by Coherent Market Insights.
Market Overview:
Algorithmic trading, also known as automated trading or black-box trading, uses computer programs to analyze market data and place trade orders with little to no human involvement. Algorithmic trading relies on advanced mathematical models, high-frequency trading, and large amounts of market data to analyze multiple markets and execute trades based on predefined rules. This allows computers to execute trades in fractions of a second, much faster than human traders. Algorithmic trading has become popular in recent years due to its ability to capitalize on minute price movements and trends. Advanced algorithms can analyze huge amounts of data to spot trading opportunities that may go unnoticed by human traders. Algorithmic trading provides benefits like reduced transaction costs, enhanced liquidity, and greater operational efficiency. It has revolutionized stock trading by making markets more efficient.
Market key trends:
One of the key trends in the algorithmic trading market is the rising adoption of machine learning and artificial intelligence technologies. Machines are being trained using huge datasets to spot complex patterns and predict future market movements. This has improved the accuracy and decision-making ability of trading algorithms. Another major trend is the increasing popularity of alternative data in algorithm design. Variables like website traffic, credit card transactions, satellite imagery are providing untapped insights into evolving consumer behavior and demand patterns. Algorithmic strategies are increasingly leveraging these unconventional datasets to gain an edge over competitors. Growth of cryptocurrency and emergence of new asset classes have also opened up avenues for advanced trading algorithms. Technological advancements are allowing greater customization of algorithms as per changing market dynamics.
Porter's Analysis
Threat of new entrants: The threat of new entrants is moderate as algorithmic trading requires heavy investment in infrastructure, technologies and talent. However, reducing entry barriers may attract new players.
Bargaining power of buyers: The bargaining power of buyers is low as the algorithmic trading services market is highly fragmented and global. Buyers have limited influence over pricing as they can easily switch to other providers.
Bargaining power of suppliers: The bargaining power of suppliers is low due to availability of alternative solution providers and commoditization of certain traded assets.
Threat of new substitutes: The threat of new substitutes is low as algorithmic trading offers niche benefits over traditional trading methods. However, automated/algorithmic options in other asset classes can act as substitutes.
Competitive rivalry: The competitive rivalry is high among the key global players owing to their global presence and service differentiation.
Key Takeaways
Global Algorithmic Trading Market Size is expected to witness high growth, exhibiting CAGR of 7.2% over the forecast period, due to increasing complexities in financial markets and focus on reducing trading costs.
The North American region dominated the algorithmic trading market in 2021 with a market share of over 35%, due to heavy investments in technological advancements by major market participants in the US. Asia Pacific is expected to witness the fastest growth over the forecast period supported by growth of algorithmic trading in emerging countries like India and China.
Key players operating in the algorithmic trading market are AlgoTrader GmbH, Trading Technologies International, Inc., Tethys Technology, Inc., Tower Research Capital LLC, Lime Brokerage LLC, InfoReach, Inc., FlexTrade Systems, Inc., Hudson River Trading LLC, Citadel LLC, and Virtu Financial. The major players are focusing on delivering differentiated solutions and expanding their global footprint through mergers & acquisitions.
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