Algorithmic Trading - A report

http://www.aitegroup.com/reports/200610311.php

A New Report from Aite Group

Algorithmic Trading 2006: More Bells and Whistles

Algorithmic trading has hit the mainstream in the U.S. equities market. For operational efficiency as well as a continued drive for capturing alpha, algorithmic trading is increasingly becoming the execution tool of choice for both the sell-side and the buy-side traders. Aite Group estimates that at the end of 2006, the share of algorithmic trading will approach 33% of the total equities trading volume. By the end of 2010, Aite Group estimates that approximately 53% of all equities trading will be done through algorithmic trading.

Algorithmic trading continues to grow, according to a new Aite Group report. The adoption of first-generation algorithms appears to be nearing its end in the U.S. market. Instead, most brokers have moved on to develop more sophisticated algorithms that are capable of supporting portfolio trading, adapting to real-time changing market conditions, and seeking darks pools of liquidity.

This report provides an update on the state of the algorithmic trading market and focuses on identifying new market trends and highlighting market challenges. The report also provides an estimated adoption rate for algorithmic trading services in the U.S. securities industry.

According to Brad Bailey, a Senior Analyst at Aite Group and co-author of the report, "The role of the buy-side trader has become very complicated. There are so many routes to getting trades done and finding liquidity; the landscape for trading is evolving quickly, as are algorithms."

Job Opportunities

The increasing use of algorithmic trading will benefit those with the right combination of IT skills, trading knowledge and expertise with quantitative trading strategies.

Especially in demand are those with quantitative research skills, as well as individuals who can bring their own trading strategies to hedge funds and bulge bracket firms, according to Lou Ricci, president of the Hagan-Ricci Group, a New York City firm specializing in front office hiring in IT, trading and quantitative research.

"On the lower end, the ideal job candidate in the algorithmic trading arena is the person with the right programming skills. At the top of the game are the Ph.D. types who can build the algorithms, as well as traders who can bring together the strategy and IT side of it," Ricci says.

Annual pay ranges from $250,000 to $1 million or more, he adds, depending on skill sets, job experience and rank.

Job opportunities are also increasing abroad, as firms in Europe and Asia adopt algorithmic trading models.Large brokers have already moved into major European markets and, to a lesser degree, Asian markets to provide their various automated trading strategies to the global buy-side clients.

http://news.efinancialcareers.co.uk/NEWS_ITEM/newsItemId-9145


Risks of Trading

Sept. 19, 2007

BOSTON (MarketWatch)
http://www.marketwatch.com/news/story/morgan-stanley-says-significant-losses/story.aspx?guid=%7B7A55FBE9%2DB5F6%2D4164%2D869A%2D93F3CCAA1054%7D&siteid=rss

Morgan Stanley said it saw "significant trading losses" in its quantitative strategies in the fiscal third quarter. The company said the losses partially offset record results in derivatives and prime brokerage and record trading volumes in its core equity business. Morgan Stanley said equity sales and trading net revenue rose 16% from a year earlier to $1.8 billion.

Economic Times article on 27 October 2007 (page 20) gives the figure of loss as $480 million from the trading desk that employed computer generated models to trade and make money.