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Use of futures markets algorithms with greater sophistication shifts into high gear

TABB Group expects algorithmic trading in futures markets to continue expanding faster over the next two years, with a 96 per cent compound annual growth rate (CAGR) from 2011 to 2015.

According to a report published by TABB, “Algos in Futures Markets: Shifting into High Gear,” written by senior analyst Matt Simon, this is occurring as institutional buy-side firms are shifting from traditional voice-based or direct market access (DMA) order-execution methods to algorithms with greater levels of sophistication. 
Buy-side traders are beginning to realise that a simple algo is not sufficient for all order types. In order to achieve improved execution, they are evaluating the range of automated tools provided by the leading futures commission merchants (FCMs) and vendors.
These client demands are also providing revenue opportunities for brokers, technology providers and the exchanges that must support algorithmic trading.
“For buy-side firms to stay competitive, rather than relying on strategies that their head traders do not always understand or find difficult to use, they’re seeking more automated trading capabilities, leading to the use of this new wave of more sophisticated order types,” says Simon.  

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