Automated Trading Seen Dominating Futures Markets by 2010

Discussion in 'Wall St. News' started by makloda, Nov 29, 2007.

  1. from

    Automated Trading Strategies Seen Dominating Futures Markets by 2010
    By Michael S. Fischer, Senior Financial Correspondent | Wednesday, November 28, 2007

    NEW YORK (—An estimated 90% of all futures market trades will be transacted through automated trading strategies by 2010, up from nearly 50% of total activity currently.

    According to a new report from the TABB Group, "Futures Trading Platforms: The Evolution of Point-and-Click Trading," futures markets have been transformed during the past decade as the embrace of technology has resulted in a marketplace dominated by firms with sufficient resources to invest in systems that can negotiate the complex global marketplace.

    One result, according to the report, has been the sidelining of small local traders who dominated Chicago futures pits from their inception. These traders have struggled—mostly successfully—to transform their innate abilities into strategies that could be executed on a screen, resulting in a new market structure dominated by institutions operating globally.

    Vendors have helped level the playing field, enabling smaller traders to interact with the marketplace, by supplying a wide range of tools and solutions. Although many opportunities present themselves to skilled traders throughout the trading day, competition from computerized trading systems will eventually eliminate the "little guy," according to the report. "As the market continues to become faster and the level of technical resources needed to compete becomes larger and larger, smaller independent traders and less-sophisticated trading firms will be forced from the business," according to the report.

    TABB Group said that automated strategies, including market making and algorithmic trading activities, will increasingly dominate the futures market, growing to more than 90% of all trading strategies by the end of the decade.

    The firm added this qualification: The market will still serve as an important vehicle for more traditional investors seeking to position, hedge and speculate. But it won't remain a viable speculative marketplace for those who can't afford to invest in needed technology and systems.

    Lucky Vendors

    Trading system vendors can only savor the burgeoning futures markets, as growing volumes and new market participants have contributed to demand for their products. TABB Group said that vendors are satisfying this demand with solutions ranging from low-cost white label offerings to high-powered trading systems optimized for the needs of market makers, specialized hedge funds and prop-trading desks.

    According to the report, futures traders' spending on systems totaled about $376 million in 2007; by 2010, spending will exceed $437 million. Most of this total represents spending for front-end screen-based systems, but the rapid adoption of automated trading solutions will result in disproportionate growth in spending.

    TABB Group estimated that by 2010, the securities industry will spend more than $207 million on automated trading solutions for futures instruments. However, screen-based vendor revenues will decline over the same period with the diminishing importance of point-and-click traders.
  2. Does this mean I have 2 years to make my loot?
  3. No. Good traders will always be able to make money. The algorithms and black-boxes should cannibalize themselves because they'll tend to want to do the same thing at the same time and their rates of return should cluster slightly below the benchmark, just like index funds.
  4. will there be a headline in 2010 along the lines of this.

    ' automated trading programes are turned off because there are no other counterparties to trade with'.

    the like of simons hedge fund were so successful they squeezed out all the opposition.

    people trade to make money not turn up to give money to simons.

    at some point they wont bother playing.

    as much as i still make money trading electronically i hate everything about it.
  5. you forget that simons is not trading against "people who trade to make money" as you call it. they are trading against investors, mostlly pension funds etc. who have to trade.
  6. The way the article was written we've all got 2 years before we have to stop because we've lost it all!!
  7. If 90% of futures markets trades are executed by computerised programs by 2010 then the Exchanges will be in big trouble.

    This aggressive campaign by the algo-funds to wipe locals off the map could backfire badly.The Exchanges need a certain amount of locals to create a market.Could you imagine a market 90% models,what a joke that would be - all bid and offered all day chasing a market up and down trying to do the same trades but finding no counterparty hence doing no volume.

    The sad truth is though that locals ARE being forced out already,this prediction is a possibility but by 2010 it will be too late,the algo-funds will have raped the markets and gone on to the next thing.

    Exchanges Beware.
  8. bighog

    bighog Guest

    you guys are full of shit.............small traders will always be around. Quit wetting your pants and just learn how to trade and not worry about the big boys and girls. GET A GRIP.
    #10     Nov 29, 2007