Algo Trading’s Surge In Popularity Forces Banks To Tighten Their Grips
The world’s top banks did a simultaneous consolidation of their stranglehold. It had a $6.6 trillion per day global foreign exchange market rate last year. And now that new entrants are roaming around in the industry, the stranglehold value can increase as per a new survey.
The top global banks of the world are JP Morgan, UBS, and Deutsche Bank. The combined market share that these three global banks had in 2020 amounted to 30% of the entire market share. These banks were the top three candidates for the most widely read survey called the Euromoney FX.
According to the survey, these banks saw a surge in their value as investors surged to invest in assets and vendors that offered electronic trading and algorithmic tools. This was observed when the traditional trading market was disrupted by the COVID-19 pandemic.
Market volatilities during this pandemic have caused much disturbance in the market values of different assets. The most drastic change was observed in March when the largest trading firms that were supported by banks and hedge funds in New York, Hong Kong, and London closed down. The offices were closed and the workers were left unemployed.
As a consequence of the falling traditionally rooted trading floors, an increase in algorithmic and electronic trading was observed. This was because such entities had already made heavy investments in the industry and took advantage of that when the pandemic was at its worst stage.
The head of macro eCommerce at JP Morgan says that their investment in the field at that time was very important. Their investment in technology and algorithmic trading became useful when auto trading bots started to hit the market. Algorithmic trading helps with the efficient management of cost and liquidity accessibility.
These top global banks are set in motion as new entrants in the industry are offering much better trading conditions. These include fast execution speed and deeper trading liquidity. At that time, the marker which was based on the London market fell to fourth place.
Making transactions via powerful algorithms and computers is becoming an increasingly popular activity. The number today has preceded any number in the previous years because of the pandemic.