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Buy Side Expands Use of Algos In Futures Trading: Study

Firms are opting for electronic trading tools for futures trading with volumes on the upswing, according a Tabb Group study.

U.S. buy-side firms are expanding their use of algorithms and direct market access trading in order to make futures transactions more efficient, according to a study conducted by Tabb Group.

Trades that are being routed through electronic channels now account for the vast majority of futures transaction volume, Tabb Group said after speaking with 51 head traders at asset management firms and hedge funds during the fourth-quarter of 2011.

Futures trading has become key throughout the buy side, with traditional long-only asset managers, hedge funds and commodity trading advisors increasingly emphasizing such transactions within their overall strategies, the firm added.

As a result, the marketplace is becoming much more competitive, Tabb said, noting that firms with futures-specific portfolios are now looking to compete against more diversified institutions. They're also integrating automated trading tools into their workflow in order to make their executions more efficient, according to Tabb.

"Futures trading is a focus point for large buy-side firms that are seeing growing volumes and making the requisite investments into automated solutions to self-direct more of their order flow, trade more efficiently, minimize trading costs, and execute more complex trading strategies," Tabb Group analyst Matt Simon said in statement. As the Senior Editor of Advanced Trading, Justin Grant plays a key role in steering the magazine's coverage of the latest issues affecting the buy-side trading community. Since joining Advanced Trading in 2010, Grant's news analysis has touched on everything from the latest ... View Full Bio

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