Algorithmic-based equity trading is expected to reach nearly 25% of total equity trading volume by 2008, up from 14% today, according to a new report from Celent Communications. The report estimates that institutional investors represent the industry's largest growth segment, with a five-year compound annual growth rate forecast of 30%.
The report said institutions on the whole are not comfortable navigating all the algorithmic trading strategies available and that increased education, in the form of better pre-trade and post-trade analytics and hands-on assistance from vendors, will be the key to getting more institutions to trade algorithmically.
Beyond equities, longer-term opportunities for algorithmic trading lie in fixed-income and foreign exchange markets as well as in futures and options, according to Celent.
