Rise of algorithmic trading creates new risk issues

Proponents of algorithmic and off-exchange trading point to the benefits that reduced trading costs can have for investment performance and profits of major dealers. However, there are concerns about the emergence of unanticipated and uncontrollable new risks that automated trading activities present to the financial system. Georgina Lee reports


Dealers, encouraged by regulatory reform and technology upgrades by exchanges in markets such as Japan and Australia, are planning for a predicted explosion of algorithmic trading in the region. As a result, major investment banks in Asia have embarked on an aggressive hiring spree to attract the talent they need to build state-of-the-art electronic trading capabilities during the past 12 months.

The reason is that institutional investors are warming to electronic connectivity such as direct

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