Automated trading to compose 90% of futures by 2010

Pit trading is fading fast. An estimated 50% of all futures markets transactions in 2007 occurred through automated trading strategies – including market-making and quantitative black-box trading activities - and this proportion will rise to 90% by 2010, according to research by Massachusetts-based financial research company Tabb Group.

Tabb's senior research analyst, Andy Nybo, wrote that a new generation of IT-literate traders is entering the futures market and sophisticated trading technology is being adapted for everyday users, allowing them to participate in futures trading.

“Demand for sophisticated functionality leveraging the capability of the futures market structure will continue unabated, coming from all sides of the market, from the largest market-makers and hedge funds to the independent trader,” he wrote in a research note published this week.

Tabb estimated there are more than 30,000 third-party vendor screens in use today across the futures industry, generating $200 million in annual screen revenues for the leading vendors. The firm noted front-end trading systems from an expanding number of vendors now allow firms to quickly build and implement strategies, essentially acting as quantitative model-development programs.

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