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The algorithmic trading market size is estimated to grow by USD 11.19 billion at a CAGR of 12.23% between 2022 and 2027. Market growth is influenced by several factors, including the high demand for market surveillance solutions to ensure compliance and integrity, the increasing integration of financial markets, and the expanding opportunities in the Asia-Pacific (APAC) region. The need for robust surveillance systems to detect and prevent market abuse is driving market growth. Additionally, the integration of global financial markets is creating a need for advanced surveillance tools to monitor transactions across borders. The APAC region presents significant growth opportunities due to its large and rapidly growing economies, increasing regulatory scrutiny, and the need for sophisticated surveillance systems to maintain market integrity.
It also includes an in-depth analysis of drivers, trends, and challenges. Furthermore, the report includes historic market data from 2017 to 2021.
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This market report extensively covers segmentation by component (solutions and services), end-user (institutional investors, retail investors, long-term investors, and short-term investors), and geography (North America, Europe, APAC, South America, and the Middle East and Africa).
The market share growth by the solutions segment will be significant during the forecast period. The solutions segment mainly includes the software used by traders for algorithmic trading. Algorithmic trading requires software platforms for the execution of large trade orders. To effectively manage high volumes of orders in time, algorithms are employed by private trading firms, hedge funds, and investment banks. With software integration into trade systems, traders can earn profits much more quickly than they traditionally do.
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The solutions segment shows a gradual increase in the market share of USD 6.44 billion in 2017. To assist traders in the management of trading for funds and investments, companies offer a comprehensive range of software solutions. Customization as per user requirement, fast, automatic processing of high-volume data, reliability, cost-effectiveness, and availability of guidance for installation and customization are the major features associated with this software solution.
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North America is estimated to contribute 35% to the growth of the global market during the forecast period. Technavio’s analysts have elaborately explained the regional trends and drivers that shape the growth during the forecast period.
The growth of financial trading has increased significantly in North America. Continuous trade monitoring and surveillance in the market, presence of retail and institutional traders, increasing focus on technology development, growing focus on AI and machine learning tools, and presence of prominent companies are the major factors driving the growth in North America.
The market is driven by the adoption of algo trading and black box trading, where computer programs execute trades based on mathematical algorithms and predefined rules. This approach is widely used in trading for stocks in stock market, bonds, currencies, and commodities, offering automation and reducing the risk of human error. However, it also faces challenges such as market volatility and price fluctuations. The rise of the cryptocurrency market has further expanded the scope of algorithmic trading. Financial institutions, including pension funds and mutual funds, are increasingly using artificial intelligence (AI) and cloud-based solutions for automated trading to improve efficiency and response times. Our researchers analyzed the data with 2022 as the base year, along with the key drivers, trends, and challenges. A holistic analysis of drivers will help companies refine their marketing strategies to gain a competitive advantage.
The high demand for market surveillance is driving growth in the market. There is an increase in the demand for market surveillance in the market that should drive compliance requirements so that market participants can keep track of their investment patterns and trading activities over the forecast period. To optimize their data management strategies and address the shortcomings of systems, top market players are attempting to do so. companies must build a market with international as well as regional interdependencies.
However, this, in turn, will help market players have the best assets globally. To build high-risk infrastructures and augment the equity market over the forecast period, strategies are being formulated. These strategies may include the adoption of Hybrid cloud solutions to enhance flexibility and scalability, as well as automation to streamline processes and reduce operational costs. Additionally, the use of financial service algorithms can help in making data-driven investment decisions and managing risks more effectively in the equity market. To meet the needs of a growing client base, insurance agents are attempting to set up risk management platforms. Market surveillance is expected to monitor and detect manipulation, abuse, and fraudulent behaviour patterns in the market across orders and trades, which is expected to drive the growth of the market in focus during the forecast period.
Technological advancement is a primary trend in a market. The introduction of numerous electronic trading technologies has helped companies, as well as customers. The incorporation of liquidity aggregation and algorithmic trading across different geographies has provided easy access to a broader range of market participants. This has also enabled market participants to take share risks which result in reduced trading costs and shorter execution times. Technological developments have led to a reduction in the cost of searching, which is regarded as an important feature of OTC markets.
However, many financial institutions are now focusing on ensuring the transparency of collaterals available to market participants. To achieve this, banks focus on efficient decision-making. Banks are also trying to reduce the operational risks involved in a collateral transaction by monitoring credit risks. During the forecast period, they are expected to invest heavily in collateral management, focusing on collateral optimization, cheapest-to-deliver algorithms, and maximizing profits, which are expected to drive the growth of the market in focus.
The lack of awareness is a major challenge in a market. A few market participants are unaware of the existing best practices and guidance in the market. They're making decisions that make short-term gains. To preserve the integrity of the market, these practices may become unsustainable and need to be avoided. Language in connection with the protection of confidential information and data shall also be used. This is expected to enforce an internal control system in different FX transactions and promote greater adherence to those practices during the forecast period.
A uniform global code of conduct and principles made by the Bank for International Settlements (BIS) Markets Committee promotes greater adherence to the guidance. Creating a single global code of conduct for the FX market is a significant move. However, the same does not seem sufficient. Best practices to complement these rules should also be included. The Global Code of Conduct may ensure the smooth functioning of the markets and provide sufficient confidence between players to treat each other well, which is expected to hinder the market growth during the forecast period if it is supported by integrity and function.
The market research report includes the adoption lifecycle of the market, covering from the innovator’s stage to the laggard’s stage. It focuses on adoption rates in different regions based on penetration. Furthermore, the market forecasting report also includes key purchase criteria and drivers of price sensitivity to help companies evaluate and develop their growth strategies.
Global Market Customer Landscape
Companies are implementing various strategies, such as strategic alliances, partnerships, mergers and acquisitions, geographical expansion, and product/service launches, to enhance their presence in the market.
63 Moons Technologies Ltd. - The company offers algorithmic trading solutions through a platform called ODIN.
The research report also includes detailed analyses of the competitive landscape of the market and information about 15 market companies, including:
Qualitative and quantitative analysis of companies has been conducted to help clients understand the wider business environment as well as the strengths and weaknesses of key market players. Data is qualitatively analyzed to categorize companies as pure play, category-focused, industry-focused, and diversified; it is quantitatively analyzed to categorize companies as dominant, leading, strong, tentative, and weak.
The market report forecasts market growth by revenue at global, regional & country levels and provides an analysis of the latest trends and growth opportunities from 2017 to 2027.
The market is characterized by the use of computer programmes that execute trades based on predefined rules, offering benefits such as market transparency, accountability, and speed. These algorithms are deployed on algorithmic trading platforms, often using Cloud based solutions, Cloud based deployment, Cloud based trading, for scalability and accessibility. Large enterprises and capital markets firms use financial service algorithms and matching engines to enhance trading efficiency. Despite its advantages, algorithmic trading has also been associated with risks such as flash crashes, prompting the need for robust cloud technologies and business agility. Asset management firms and trading firms increasingly rely on workflow solutions and digital onboarding solution for efficient operations in the algorithmic trading landscape.
Moreover, in the market, computer programs play a crucial role in executing trades swiftly and efficiently, particularly in dealing with high trading volume. These programs are often supported by professional services and software technology services to ensure seamless operation. Blockchain technology is increasingly integrated into algorithmic trading systems for Workflow solution and digital onboarding, enhancing security and transparency. The use of covert execution algorithms and automated trading bots further streamlines trading processes, allowing for quick and precise transactions. Platforms like DoubleVerify are utilized for verification and validation purposes, ensuring the integrity of trades in the algorithmic trading ecosystem.
Market Scope |
|
Report Coverage |
Details |
Page number |
166 |
Base year |
2022 |
Historic period |
2017-2021 |
Forecast period |
2023-2027 |
Growth momentum & CAGR |
Accelerate at a CAGR of 12.23% |
Market growth 2023-2027 |
USD 11.19 billion |
Market structure |
Fragmented |
YoY growth 2022-2023(%) |
12.05 |
Regional analysis |
North America, Europe, APAC, South America, and Middle East and Africa |
Performing market contribution |
North America at 35% |
Key countries |
US, China, Japan, UK, and Germany |
Competitive landscape |
Leading companies, Market Positioning of companies, Competitive Strategies, and Industry Risks |
Key companies profiled |
63 moons Technologies Ltd., AlgoBlocks, AlgoBulls Technologies Pvt. Ltd., AlpacaDB Inc., Argo SE, Auros, CRYPTO TECHFIN SL, InfoReach Inc., iRageCapital Advisory Pvt. Ltd., MetaQuotes Ltd., QuantConnect Corp., QuantCore Capital Management LLC, Refinitiv, Software AG, Symphony Fintech Solutions Pvt. Ltd., Tata Consultancy Services Ltd., Thomson Reuters Corp., uTrade, Wyden AG, and VIRTU Financial Inc. |
Market dynamics |
Parent market analysis, Market growth inducers and obstacles, Fast-growing and slow-growing segment analysis, COVID-19 impact and recovery analysis and future consumer dynamics, and Market condition analysis for the forecast period. |
Customization purview |
If our report has not included the data that you are looking for, you can reach out to our analysts and get segments customized. |
We can help! Our analysts can customize this market research report to meet your requirements.
1 Executive Summary
2 Market Landscape
3 Market Sizing
4 Historic Market Size
5 Five Forces Analysis
6 Market Segmentation by Component
7 Market Segmentation by End-user
8 Customer Landscape
9 Geographic Landscape
10 Drivers, Challenges, and Trends
11 Vendor Landscape
12 Vendor Analysis
13 Appendix
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