Algorithmic Trading Market Size, Share, Opportunities, And Trends By Solution (Software, Services), By Type (Foreign Exchange (FOREX), Stock Markets, Exchange-Traded Fund (ETF), Bonds, Cryptocurrencies, Others), By Deployment (On-Premises, Cloud), And By Geography - Forecasts From 2023 To 2028

The algorithmic trading market is projected to show steady growth during the forecast period.

Algorithmic trading refers to the application of a pre-defined set of instructions and computer algorithms to facilitate the execution of trading operations by consumers by conducting a thorough analysis of the. Trading decisions made by adopting algorithmic trading aid in enhancing accuracy and objectivity while simultaneously lowering any bias as algorithmic trading decisions are based on precise, data-driven algorithms as opposed to human brokers and traders whose emotions could influence the trading decisions. The potential for loss can be mitigated by programming algorithmic trading systems to adhere to rigorous risk management guidelines. Further, algorithmic trading not only lowers risk but also aids in more reliable trading. Algorithms can assist traders in the efficient and precise execution of a large number of trades and minimize human inaccuracy and error margin. Algorithmic trading software and solutions are most predominantly applied for trading in foreign exchanges, stock markets, exchange-traded funds, bonds, and cryptocurrencies.

Market Drivers

• The increasing advancement in the AI technology and machine learning models is enhancing the demand of algorithmic trading software solutions and other trading operations.

For instance, an increasing number of CFD trading firms and financial stock brokerage firms in the UAE are adopting AI technology to facilitate the provision of precise data-driven trading decisions to their customers in 2022. Further, an analysis report released by Upstox predicts that approximately 70% of all trades on Upstox in 2022 were carried out using algorithms. The application of AI technology improves the accuracy of pattern prediction and market forecasting offered by algorithmic trading software and services. In addition, the emergence of AI-based stock trading bots such as TrendSpider, SignalStack, and Stock Hero is increasing the consumption of algorithmic trading services. Therefore, the development in AI technology accuracy enhances the results offered by algorithm-based trading predictions which will drive the demand for the algorithmic trading market.

• The expansion of the stock market and trading operations

The increase in the stock market and its trading applications across different countries is resulting in an increasing need for algorithmic trading applications. For instance, Zerodha, an Indian stock trading and investment firm reported that the number of consumers using its application increased from 5,270,000 people in 2021 to 9,250,000 people in 2022. In addition, the National Stock Exchange of India estimated that approximately an aggregate of 2,113 enterprises have listed themselves on the Indian stock markets in 2022. Further, the World Federation of Exchanges revealed that the total number of listed companies on the US stock exchanges amounted to 58,200 in 2022, increasing at a rate of 19.4% since 2021. Therefore, the increase in stock market activities across stock markets of major economies fueled by the increase in the listings of the number of companies is spreading the awareness of the stock market among consumers without the fundamental knowledge of trading and investing which is serving as a significant factor expected to stimulate the expansion of the algorithmic trading market over the forecast period.

The inefficiency of algorithmic trading applications to predict the occurrence of black swan events in the stock markets could affect the growth algorithmic trading market.

The working of algorithmic trading software and solutions is based on the analysis of past data to forecast market movements in the future. However, the presence of irregularities and unpredictable events in the stock market such as a black swan event which refers to the crash of a stock market by more than 6 standard deviations could hurt traders using algorithmic trading applications as well. Even though the occurrence of black swan events is rare, the unpredictability of stock markets in certain unforeseen adverse circumstances such as the Covid pandemic and the Ukraine-Russian war has the possibility of resulting in financial loss in certain cases which could restrict the growth of the algorithmic trading market during such incidents.

Key Developments

• In April 2023, an India-based trade brokerage enterprise, TradeSmart announced its partnership with KEEV, an Indian algorithmic trading software application to provide automated trading ideas to TradeSmart customers who lack the technical knowledge of trading in stock markets.
• In December 2022, ACT Capital, a company involved in the provision of algorithm-based trading services related to companies in the energy industry introduced an associate program with algorithmic trading characteristics and facilitate the monetization of customers’ databases.
• In July 2022, Citrus Consulting, a Dubai-based consultancy and technology company announced its partnership with Traydstream to develop and launch a SaaS-based algorithmic trade automation application to be used by Citrus Consumtling clients in the BFSI sector of the Middle East and North Africa region.

Asia Pacific holds a prominent share of the algorithmic trading market and is expected to grow in the forecast period.

Algorithmic trading in the Asia Pacific region is experiencing significant growth due to the spread of awareness of the compounding effect of the stock markets but the lack of market-related trading technical knowledge among consumers. The enlargement and the digitalization of the commodity derivatives and stock markets in the Asia Pacific region and the standardization of trading essentials by the respective regulatory authorities of different governments. In addition, the simplification of stock trading processes by certain enterprises in Asian countries is driving the increase in the number of consumers opting for stock market investments and trading activities. For instance, Zerodha, an Indian private stock trading company simplified the Demat account procedures and other trading and investment requirements which resulted in the dramatic enlargement of the company’s profits over the years to reach INR4964 crores in 2022. In addition, Zerodha announced the introduction of an enhanced version of its algorithmic trading platform, Streak in November 2021. Hence, the penetration of stock market awareness and the increase in trading activities across different stock markets in the Asia Pacific region is projected to expand the algorithmic trading market in the region.

Key Market Segments:

• By Solution
  • Software
  • Services
• By Type
  • Foreign Exchange (FOREX)
  • Stock Markets
  • Exchange-Traded Fund (ETF)
  • Bonds
  • Cryptocurrencies
  • Others
• By Deployment
  • On-Premises
  • Cloud
• By Geography
  • North America
    • USA
    • Canada
    • Mexico
    • South America
    • Brazil
    • Argentina
    • Others
    • Europe
    • Germany
    • France
    • United Kingdom
    • Spain
    • Others
    • Middle East and Africa
    • Saudi Arabia
    • UAE
    • Israel
    • Others
  • Asia Pacific
    • China
    • Japan
    • India
    • South Korea
    • Indonesia
    • Thailand
    • Others