Algorithmic Trading Market Expected to Reach USD 25.68 Billion by 2031, Driven by Cloud-Based Trading Platforms

As per the report published by Kings Research, the global Algorithmic Trading Market was valued at USD 14.58 billion in 2023. The market is projected to reach USD 25.68 billion by 2031, growing at a CAGR of 7.33% from 2024 to 2031.

Technological advancements in artificial intelligence, machine learning, and big data analytics are driving market growth. Institutional investors, asset managers, and hedge funds are increasingly adopting algorithmic trading strategies to improve order execution, reduce transaction costs, and enhance portfolio performance. Factors such as increasing market liquidity, regulatory oversight, and a growing emphasis on environmental, social, and governance (ESG) considerations are contributing to the surge in algorithmic trading adoption.

Additionally, regulations such as MiFID II and Regulation NMS in Europe and North America are fostering widespread adoption of algorithmic trading and increasing the demand for compliance and transparency solutions. The proliferation of alternative data sources and the integration of ESG factors into algorithmic trading strategies offer lucrative opportunities for market participants to gain a competitive edge and explore new growth avenues.

Key Insights

• Based on deployment mode, the cloud segment held the largest market share of 62.96% in 2023
• Based on trading type, the stock market segment generated the highest revenue of USD 5.52 billion in 2023
• Based on end user, the institutional investor segment is anticipated to capture a significant share of 34.10% by 2031
• On the basis of region, Asia-Pacific is projected to account for a notable share of 24.50% by 2031

MarketAxess Acquires Pragma to Strength Services

October 2023: MarketAxess Holdings Inc., a provider of platforms of electronic trading for fixed-income securities acquired Pragma, a company specializing in quantitative trading technology, which offers algorithmic and analytical services.

Cloud-based Algorithmic Trading Platforms to Aid Market Growth

The adoption of cloud-based algorithmic trading platforms is providing a paradigm shift for industry players due to scalability, cost-efficiency, and improved accessibility for algorithmic traders. It enables them to leverage sophisticated trading algorithms without the need for extensive infrastructure investments. By migrating algorithmic trading operations to the cloud, market participants are seamlessly scaling their trading activities, optimizing resource utilization, and reducing operational costs.

Furthermore, cloud-based platforms facilitate real-time collaboration and data sharing, empowering traders to develop and deploy algorithmic strategies more efficiently. As the adoption of cloud-based solutions continues to grow, algorithmic traders stand to benefit from increased flexibility, agility, and scalability in their trading operations, driving greater efficiency and innovation in the market.

Surging Demand for Customized Algorithmic Solutions to Offer Lucrative Opportunities for Market Development

With increasing demand for personalized investment strategies and risk management solutions, there is a significant opportunity for firms to develop bespoke algorithmic trading algorithms tailored to individual client requirements. By collaborating closely with clients to understand their unique objectives, risk tolerance, and investment preferences, firms are aiming to design algorithmic solutions that deliver superior performance and value.

Moreover, offering customized algorithmic solutions allows firms to differentiate themselves in a crowded marketplace and build long-term client relationships based on trust and expertise. As the demand for personalized investment solutions continues to grow, firms capable of delivering tailored algorithmic solutions effectively are well-positioned to capture market share and foster revenue growth in this burgeoning segment.

Asia-Pacific to Record a Robust CAGR of 8.59% Over 2024-2031

Based on region, the global algorithmic trading market is classified into North America, Europe, Asia Pacific, MEA, and Latin America.

Asia-Pacific is expected to grow rapidly in the forthcoming years. This significant growth is mainly fueled by the expansion of its financial markets and increasing investor participation, thereby propelling the demand for the adoption of algorithmic trading solutions. This surge in market activity is poised to fuel demand for sophisticated trading strategies that capitalize on market opportunities and optimize execution efficiency.

Furthermore, countries in the region are making substantial investments in developing advanced technological infrastructure, thereby contributing significantly to the widespread adoption of algorithmic trading. A study by McKinsey & Company highlighted the increasing significance of algorithmic trading in Asian wealth management, with 70% of Asian wealth managers anticipating its significant role by 2026. This underscores the region's commitment to adopting technological innovation and leveraging algorithmic trading to enhance investment outcomes and meet evolving client demands.

Moreover, the region is projected to experience promising opportunities in developing localized algorithmic trading solutions tailored to the specific needs of individual Asian countries. Additionally, the high mobile phone penetration rate in Asia creates an opportunity for the development of user-friendly mobile-based algorithmic trading platforms, catering to the preferences of retail investors who seek convenience and accessibility in their trading activities.

Companies Launch Cutting-Edge Products to Expand Their Market Reach

The global algorithmic trading market is fragmented with key players such as QuantConnect, Symphony, TATA Consultancy Services Limited, Citadel Enterprise Americas LLC, Jane Street Group, LLC, Tradetron, IMC, Reuters, XTX Markets Limited, Wyden, and others. Companies employ a variety of strategic measures such as acquisitions, mergers, partnerships, product introductions, and collaborations to expand their business globally and enhance their competitive position.