November 2006 FINANCIAL INTELLIGENCE GUIDES

6 ALGORITHMIC TRADING

Ten algorithmic trading trends in the lead-up to 2010
As algorithmic trading enters the mainstream, Dr John Bates and Mark Palmer of Progress Software give 10 predictions for the future
APAMA, A REVOLUTIONARY trading platform based on event stream processing (ESP) technology, has led the way in innovation since its entrance into the electronic trading scene in 2002. The adoption of Apama began with JPMorgan and Deutsche Bank and its advancement has presaged the evolution of the algorithmic trading market. Four years later, with algorithmic trading entering the mainstream of trading operations, our unique vantage point gives us pause to consider what is next. Here are 10 predictions for the future of algorithmic trading, looking ahead to 2010: ing strategies. With algorithmic trading being adopted by firms of various shapes and sizes, the need for technology that supports unique trading techniques will continue to grow.

DR JOHN BATES Founder and vice-president Apama products, Progress Software

MARK PALMER Vice-president event stream processing, Progress Software

Once the domain of only the largest institutions, algorithmic trading is now entering the mainstream, triggering an ‘algorithmic trading arms race’. In 2002, having algorithmic tools was enough to generate alpha. Buy-side firms were content to use pre-packaged ‘black-box’ algorithms. However, the game has changed. Alpha now goes to the firm with the best algorithms – and what is considered ‘best’ changes by the day. Only the firms that can introduce new algorithms quickly will stay ahead. The future promises more of the same, with the landscape dominated by those who have the most effective, innovative, evolvable algorithm and algorithmic trading strategies.

1. Algorithmic innovation, not adoption, is state-of-the-art

The core foundation of Apama is ESP, a new technology that monitors streaming event data, such as market