Tabb Group: Buy-side continues to embrace algorithms

We noted recently that some buy-side firms are bent on upgrading their buy-side tools, creating more sophisticated algorithmic technologies. Deutsche Bank (NYSE: DB) in particular has been re-tooling to better trade in a high-frequency world. A recent Tabb Group report has found that the buy-side is embracing algorithmic trading quickly, which just might require a lot of investment at some firms.

Tabb Group predicts that the use of low-touch algorithms will reach 35 percent in 2011; at that point, for the first time, low-touch trading will be on par with high-touch sales traders. Algorithms "continue to be the stand-out winner amongst trading strategies, continuing to grow in importance and volume as traders turn to low-touch execution methodologies," according to the report.

Vendors are certainly becoming more active, and you would think more firms will enter the market to provide the buy-side these types of trading alternatives.

A lot of this is oriented around dark pools. Deutsche Bank, for example, launched a dark pool-aggregator called SuperX that made quite a splash when it was released in March. The firm pitched it as major step up in innovation for users bent on better management of this liquidity.

That said, the demand for high-touch trading will not simply go away. There will always be orders that require a human approach, especially when it comes to tricky orders for relatively illiquid securities.

For more:
- here's a look at the report

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