Direct market access and algorithmic trading are set for rapid adoption among European buy-side investors according to a new report from analyst group Tabb.
The Tabb Group study - which surveyed 70 firms across Europe - finds the buy side well-positioned for electronic trading growth with FIX-directed order flow forecast to jump to 55% and algorithmic adoption to increase to 58% of buy side firms by 2009
Yet despite the push for unification and harmonisation, few firms expect to see a truly open single market emerging in the near future.
Adam Sussman, Tabb senior research analyst, says: "Cultural and geographic differences will not disappear quickly, which is why less than 33% of the buy-side believe that a single market structure will take hold in the next five years. Even after MiFID is adopted into law and implemented across the 30 countries, a grand unification of capital market is not in the cards for at least a few decades."
Despite this, 55% of the buy-side believes MiFID will have a significant impact on how they execute their orders, the greatest change being the fragmentation of liquidity across a host of new venues such as Project Turquoise, Instinet’s Chi-X and Equiduct.
The report suggests that by 2009, over 58% of the buy-side will be using algorithms, up from 41% in 2007. The percentage of orders routed via FIX is also set to continue growing, rising from 44% to 55% by 2009 with an additional 10% routed via other electronic methods.