For the first time in five years, the volumes of trades executed using algorithms has declined for the buy-side, according to research from TABB Group.
The group put the decline down to firms compensating for lower commission wallets with higher-rate execution channels, reviewing and verifying their understanding of electronic tools’ functionality and safeguards, and finally that they are aiming to differentiate their business models.
Volume allocated to DMA/algos decreased to 38% from 41% for asset managers and to 43% from 48% for hedge funds in part due to lower commission wallets.
The data comes from TABB’s report: US Institutional Equity Trading 2015.
The research also looked at trading and research commission unbundling, finding that US buy-side firms on average used 68 research firms with small, medium and large firms averaging 46, 63 and 124 firms respectively.
The group said that this magnified the “potential impact of European regulation on US buy-side operations”.