The last ten years have seen an increasing number of
investment management and brokerage firms using quantitative techniques to
select and trade financial products. This increase is due to a variety of
factors, including revenue opportunities, the availability of
off-the-shelf technology, and the popularization of empirical investment
analysis on Wall Street.
In a new report, "An Overview of
Quantitative Research and Trading," Celent analyzes the trend
of investment managers and brokerage firms to use quantitative techniques
to select and trade financial products.
The
rise of model-driven trading is a steady undercurrent in today's equity
market environment. Suggestions of this growth can be seen from ECN
trading in NYSE-Listed securities, new quantitative subcategories for
NYSE-reported program trades, and an increase in off-the-shelf
technologies for model-driven trading. Celent estimates that 34% of all
trading in US equities is now purely model-driven, including trades made
intra-day or over a longer time horizon. Celent expects this number to
increase slightly over the next few years before hitting a point of
equilibrium near 45%.
The last few years have seen an explosion of
interest in technologies that assist with quantitative trading. Databases,
order management systems and order routing tools are the three areas
covered in this report. Celent believes that many firms are considering or
already have outsourced their development of databases and quantitative
order management systems. Our projections of IT spending show the entire
database and quantitative OMS market growing slightly over the next three
years, with greater spending migrating towards vendors and away from
in-house development.
"Quantitative research and trading is a
popular trend, though one that is grounded in solid investment
theory" comments Sang Lee,
co-author of the report. Regardless of the rationale, Celent expects the
growth of quantitative research and trading techniques to continue through
the next three years.
The 30-page report contains 7 figures and 4 tables.
