Remember the old days? ‘Bigfoot in Boston is making the moves,’ your exchange contact might have whispered. Over the next few days or even weeks, you could watch as a large institution’s position was leisurely built up or unwound. Here’s how it happens today: blink and you’ve missed it.
Algorithmic trading is estimated to account for a third of all equity trades in the US and is predicted to make up more than half of trading volume by 2010. Hedge funds were behind the first surge but now, with Reg NMS in the US and MiFID in Europe spawning ever more electronic communications networks (ECNs), or dark pools, to trade in, mainstream investors are getting in on the act. Last year the NYSE’s new hybrid electronic market boosted algorithmic trading, as did the London Stock Exchange’s new electronic system, launched in June 2007.
<img alt="Next-generation algorithms
