Algorithmic Trading Market Size, Share & Trends Analysis Report By Solution, By Service, By Deployment, By Trading Types, By Types Of Traders, By Region, And Segment Forecasts, 2022 - 2030

Report Overview

The global algorithmic trading market size was valued at USD 15.55 billion in 2021 and is expected to expand at a compound annual growth rate (CAGR) of 12.2% from 2022 to 2030. Algorithmic trading is a form of automation in which a computer program is used to effectively execute a defined set of rules or instructions that includes the selling or buying of an asset regarding fluctuating market data. Furthermore, the defined sets of rules or instructions are based on quantity, price, timing, or any mathematical model. Investors and traders are adopting algorithmic trading solutions as it helps them in executing trades at the best possible prices.

Traders keep track of their investment portfolio and trading activities by using market surveillance technology. The increasing demand for market surveillance technology improved by reduced transaction costs is expected to propel market growth over the forecast period. Moreover, algorithmic trading solutions allow for easier and faster execution of orders, thereby making it attractive for exchanges. Various benefits offered by these solutions, such as simultaneous automated checks on numerous market conditions and trades timed instantly and correctly, are expected to create growth opportunities for market growth.

The emergence of algorithms and Artificial Intelligence (AI) in the financial services sector is expected to create growth opportunities for the market over the forecast period. Numerous financial services companies are increasing their machine learning and AI adoption to capitalize on the information from digitally driven channels. This has further led to the emerging trend of data-driven investments during the past few years. Moreover, AI-driven trading systems effectively analyze huge amounts of data much faster than people would do it.

High-frequency Trading (HFT) is a specialized type of algorithmic trading that includes trades with a greater degree of speed and complexity. Widespread digital transformation, the search for efficiency, and robust market conditions have collectively created a favorable environment for market growth. The use of algorithmic trading is on the rise owing to its full automation, fast trade execution, and ease of diversification capabilities. For instance, algorithmic trading automates the complete process of asset selection, order execution, trade setup identification, trade management, and trade exit.

However, the lack of consistency and accuracy in algorithms is expected to hinder market growth over the forecast period. Moreover, the lack of insufficient risk valuation and monitoring capabilities is further anticipated to negatively impact the market growth. Algorithmic trading is a completely automated process. The traders are not able to make any discretionary choices. Even if a trader understands before the execution of the order that the trading strategy will not work, the trader does not have the control to stop the program and trade. These aforementioned factors are expected to hinder market growth.

COVID-19 Impact Analysis

The COVID-19 pandemic is expected to have a positive impact on the market. The pandemic has considerably propelled the growth, owing to the increased shift toward algorithmic trading for taking decisions at a rapid pace by reducing human errors. In addition, numerous industry players have launched innovative algorithmic trading solutions during the pandemic to ensure better serving the increased trading volumes. For instance, in March 2022, Cowen Inc., an investment bank and financial services provider introduced an algorithmic trading solution to assist institutional clients in effectively navigating market dynamics resulting from increased volumes of retail trading.

Solution Insights

The platforms segment accounted for more than 70.0% share of the global revenue share in 2021. The algorithmic trading platform offers a large collection of free futures and equities data as well as an efficient platform to back-test and study trading strategies. Increasing demand for supplement trading strategies across the globe is expected to propel the segment growth over the forecast period. Moreover, the increasing need to effectively manage an investment portfolio is further anticipated to create growth opportunities for the segment over the forecast period.

The software tools segment is anticipated to register significant growth over the forecast period. Increasing adoption of algorithmic trading software tools to effectively place the trades to generate profits and identify profitable opportunities is expected to propel the segment growth. Algorithmic trading software is widely adopted by investment banks and proprietary trading firms. The abundant resource availability owing to their large size enables these firms to build their private proprietary trading software tools, including large trading systems with dedicated support staff and data centers.

Service Insights

The professional services segment dominated the market in 2021 and accounted for more than 63.0% of the global revenue. The growth can be attributed to the increasing adoption of professional services among end-users to ensure the effective functioning of trading solutions throughout the process. Moreover, professional services enable trading businesses to automate or migrate an existing systematic trading strategy. Traders can accommodate any trading strategy using professional services, which can be defined via a set of rules.

The managed services segment is expected to register the fastest growth over the forecast period. Managed services provide traders and investors with support, maintenance, and infrastructure management for efficiently developing trading strategies. Moreover, managed services are widely used by traders to effectively deploy and manage algorithmic trading solutions. Furthermore, managed services are also used for real-time monitoring of trading data feed and order execution infrastructure.

Deployment Insights

The cloud segment accounted for more than 65.0% of the global revenue share in 2021. Numerous vendors across the globe are focusing on offering cloud-based algorithmic trading solutions to achieve maximum profits and efficiently automate the trading process. Moreover, the adoption of cloud-based solutions is anticipated to grow, mainly due to their benefits, such as cost-effectiveness, scalability, easy trade data maintenance, and effective management. Traditional traders can deploy cloud-based solutions to check new trading strategies, run-time series analysis, and back-test while executing trades.

The cloud-based solutions require minimum infrastructure and offer faster processing in comparison to their traditional on-premise counterpart. Also, increasing adoption of cloud-based solutions by financial institutions to enhance their efficiency and productivity is further expected to propel the cloud segment growth. The on-premise segment is anticipated to witness significant growth over the forecast period. An on-premises algorithmic trading solution is installed and runs on computers on the premises of the businesses using the software.

Trading Types Insights

The stock markets segment held the largest revenue share of more than 36.0% in 2021. The stock market is considered one of the leading asset classes for trading numerous kinds of securities in a secured, managed, and controlled environment. Moreover, stock markets offer benefits, such as profit maximization and risk management, to financial and brokerage firms. The benefits offered by stock markets are paving the way for traders and investors to adopt algorithmic trading solutions.

The cryptocurrencies segment is expected to witness significant growth during the forecast period. The segment growth can be attributed to the increasing interest of trading professionals in cryptocurrency trading. The algorithmic trading solutions enable traders to process live market data from any of the supported cryptocurrency exchanges. These solutions also support margin and exchange trading. These aforementioned factors are expected to propel the segment’s growth.

Type of Traders Insights

The institutional investors segment accounted for over 35.0% of the global revenue share in 2021. Institutional investors, such as banks, insurance companies, credit unions, hedge funds, mutual funds companies, and investment advisors, pool their money to purchase real estate, securities, or any other kind of investment assets. Moreover, institutional investors regularly use various computer-driven algorithmic strategies in the unpredictable trading marketplace, which succumb to the trade influence. Algorithmic trading techniques enable the ers to improve their profitability and effectively cut down the costs of trades.

The short-term traders segment is anticipated to register a promising CAGR over the forecast period. Short-term traders focus primarily on price action instead of the long-term fundamentals of an asset. Algorithmic trading solutions enable short-term traders to earn quick profits from the market. Short-term traders are heavily influenced by investment strategies, thereby propelling algorithmic trading solutions demand in short-term trading.

Regional Insights

North America dominated the algorithmic trading market in 2021 and accounted for over 32.0% of the global revenue share. The regional growth can be attributed to the presence of numerous market players in the region. These vendors are also adopting numerous growth strategies to strengthen their foothold in the industry. Various factors, such as the growing investments in trading technologies and increasing government support for global trading, are expected to contribute to regional growth over the forecast period.

Asia Pacific is expected to record the highest CAGR over the forecast period. The regional growth can be attributed to the substantial investments made by public and private sectors for enhancing their trading technologies, thereby resulting in an increased demand for algorithmic trading platforms. The region has witnessed an increase in computerized trading. This, as a result, is expected to witness increased adoption of algorithmic trading solutions in the region.

Key Companies & Market Share Insights

The competitive landscape is moderately fragmented in nature and characterized by the presence of a large number of players. Numerous vendors in the market are experimenting by integrating machine learning and artificial intelligence functionalities with their existing algorithmic trading software. Algorithmic trading companies are focusing on creating effective marketing strategies and developing new solutions for maintaining and increasing their market share. The increasing trading volume across the globe is expected to create growth opportunities for the market players.

Numerous industry players are focusing on enhancing their solution functionalities. For instance, in March 2020, AlgoTrader, a prominent algorithmic trading solution provider, announced the release of AlgoTrader 6.0. Moreover, in addition to the current crypto adapters, AlgoTrader 6.0 includes various crypto exchange adapters, including Huobi, Deribit, Bithumb Global, and Payward, Inc. Also, AlgoTrader 6.0 offers full support for data generated from all market data adapters. Some prominent players in the global algorithmic trading market include:

• 63 moons technologies limited

• AlgoTrader

• Argo Software Engineering

• InfoReach, Inc.

• Kuberre Systems, Inc.

• MetaQuotes Ltd.

• Refinitiv

• Symphony

• Tata Consultancy Services Limited

• VIRTU Finance Inc.

Algorithmic Trading Market Report Scope

Global Algorithmic Trading Market Segmentation

The report forecasts revenue growth at global, regional, and country levels and provides an analysis of the latest industry trends in each of the sub-segments from 2017 to 2030. For this study, Grand View Research has segmented the global algorithmic trading market report based on solution, service, deployment, trading types, type of traders, and region:

• Solution Outlook (Revenue, USD Million, 2017 - 2030)

  • Platforms

  • Software Tools

• Service Outlook (Revenue, USD Million, 2017 - 2030)

  • Professional Services

  • Managed Services

• Deployment Outlook (Revenue, USD Million, 2017 - 2030)

  • Cloud

  • On-premise

• Trading Types Outlook (Revenue, USD Million, 2017 - 2030)

  • Foreign Exchange (FOREX)

  • Stock Markets

  • Exchange-Traded Fund (ETF)

  • Bonds

  • Cryptocurrencies

  • Others

• Type of Traders Outlook (Revenue, USD Million, 2017 - 2030)

  • Institutional Investors

  • Long-term Traders

  • Short-term Traders

  • Retail Investors

• Regional Outlook (Revenue, USD Million, 2017 - 2030)

  • North America

    • U.S.

    • Canada

  • Europe

    • U.K.

    • Germany

    • France

  • Asia Pacific

    • China

    • India

    • Japan

    • South Korea

  • Latin America

    • Brazil

  • Middle East & Africa