FICC e-Trading Survey Shows Rise in Algo-Trading

This “FICC e-Trading Survey Shows Rise in Algo-Trading” article was written by Michael Shpits, a Financial Analyst at I Know First.

Highlights:

  • Survey takers see inflation, market and economy dislocation, and the global pandemic as the developments which will have the top impact on 2022 markets.
  • Respondents predict mobile trading platforms along with blockchain and AI/machine learning technologies being the most influential in the future of trading. Of the total survey takers, 75% see an increase in electronic trading, and 63% see an increase in algorithmic trading.
  • I Know First’s Predictive Algorithm can supplement traditional portfolios and provide opportunities before the rest of the market to meet the demand for algo-driven trading in an ever-increasing computerized trading environment.

The annual J.P. Morgan FICC e-Trading Survey has been released, showcasing a sixth-year analysis of professional and institutional traders for 2022. This survey showcases the current market trends affecting all traders alike as well as the perspectives that these traders have on the future ahead.

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(Source: pixabay.com)

Predictions for the 2022 Market

According to the survey of 700 respondents of both J.P. Morgan clients and outside traders, 48% believe that inflation will be the single greatest impact on 2022 markets. As for the top daily challenge in trading, 35% of respondents chose liquidity availability. As for market structure concerns, in order of cumulative ranking, 25% of respondents ranked access to liquidity first, 16% ranked developments in financial market technology first, and 12% ranked market data access and costs first. Among market structure priorities, 51% ranked execution management system integration and set-up as first, with workflow automation/access to streaming prices and ability to aggregate as close second and third with 49% and 48% of respondents respectively.

Alternative Markets and Liquidity Landscape

In order to better understand the market outside of traditional stock and commodities, the survey also looked into trends having to do with the growth in cryptocurrency markets, with 27% of respondents saying that they are currently trading crypto, and a large number of others responding with interest to either trade or observe blockchain technology in the near future. Similar to other markets, cryptocurrency markets require liquidity, with 62% of survey takers ranking price consistency as the number one most important criterion in selecting a liquidity source. This is an increase from the 2021 result of 48%. Additionally, 58% ranked availability during volatile markets first, and 35% ranked response times as first. For the third year in a row, banks remain the top choice of traders as a liquidity source.

Future of Trading Technologies

What came most interesting from this survey is the responses that were given on the technologies which will be most influential in the next coming year for the future of trading. With retail trading now reaching smartphones, mobile trading applications were ranked first by 29%, with blockchain coming at a close second with 25%. Interestingly, it was tied with AI and machine learning which were also chosen by a fourth of the respondents as the most influential technology in the coming future for trading. In fact, when asked what percentage of FX trading will be done via algo-trading, traders responded that they see an additional 19% of their FX trading being done with algorithmic approaches in the coming two years.

To better understand this response, the survey asked what percent of the trader’s trading volume will be done through e-Trading channels. Predictions for 2023 had FX chosen with 85% and futures at 72%. All other assets groups including commodities, rates, credit, and options on futures were ranked at least 60% in terms of percent of their trading volume being done through e-Trading paths. With such an increase in electronic approaches, it is no wonder that machine learning insights are being sought after to supplement computerized trading.

Given these findings, how do respondents see their own personal trade execution-style changing going forward? It was no surprise that 75% said they will see an increase in electronic trading, and 38% said they will see an increase in voice trading. What was most striking is that more than half, 63% said that they will see an increase in personal algorithmic trading. Only 5% said they will see no change in execution-style.

Based on the results of these traders’ perspectives, it does not seem unusual that algorithmic solutions are growing amongst the growing number of e-Trading users and computerized trade executions. Only one question remains, how do traders take advantage of this trend and prepare for a world where AI-based investing is as commonplace as the traditional stock trader?

Algo-Trading: I Know First Predictive Algorithm

I Know First is the leading company in using machine learning and AI-based algorithms to provide daily forecasts for over 10,500 financial instruments. Using AI and machine learning, the Predictive Algorithm incorporates elements of artificial neural networks and genetic algorithms to provide 100% empirically driven results, avoiding human-derived biases and error-judgment assumptions.

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By separating predictable variables from those unpredictable and modeling out the chaotic system that is the publicly traded markets, I Know First’s Predictive Algorithm has been able to outperform top indices above benchmark rates consistently whilst managing less risky portfolios.

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The Investment Result for the period from January 1st, 2020 to March 23rd, 2022

Even during the coronavirus pandemic, arguably the most volatile period of recent memory, the Predictive Algorithm was able to hold returns above the S&P 500 index. How is this possible? It is done with the algorithm finding opportunities in price pattern recognition, something that cannot be captured easily, if at all by human eyes and analysis alone.

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Algo-Trading: Conclusion

By supplementing traditional portfolios with algorithmic insights and benchmarking personal investing strategies with AI-based approaches, traders can increase the opportunities they can access before the rest of the market and decrease volatility risk at the same time. To do so, investors can use the I Know First Predictive Algorithm in conjunction with their own personal methods, as well as utilize the countless strategy tutorials created by I Know First to assist clients in achieving the fullest potential of their holdings and returns.

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Please note-for trading decisions use the most recent forecast.