About a-team Marketing Services
The knowledge platform for the financial technology industry
The knowledge platform for the financial technology industry

A-Team Insight Blogs

Can Emerging Markets Resist The Algo Trading Bug in 2012?

Subscribe to our newsletter

As algorithmic trading continues to evolve, it is my view that we will start to witness more firms using their systems to trade equities not only from the U.S. and Europe, but also from the Middle Eastern, Latin America and Asian markets. The latest announcement that Colt’s sister company KVH will be expanding its low-latency network to Sydney, adding a new data and co-location centre, is indicative of the expansion of trading, and the rise in transaction volumes, across the Asia/Pacific region. New entrants, such as the Multilateral Trading Facilities (MTFs), are also bringing market liquidity and this in turn is drawing in more trading participants to the Asian markets.

However, it’s not all just about Asia; the Mexican Exchange will also be announcing the launch of a new internal trading engine, which has a reported throughput of more than 200,000 messages per second. Like KVH, the trading engine will be ultra-low latency, executing trades in round-trips of just 100 microseconds – an improvement of over 25 milliseconds on the Mexican Exchange’s legacy trading system.

As European markets continue to come under the regulatory spotlight, emerging markets remain in a perfect position to take advantage of regulatory arbitrage, a practice that enables organisations to capitalise on loopholes in regulatory systems.  A surge of regulatory arbitrage is already benefiting lightly regulated destinations such as China and Russia.

Regulated investment firms in the likes of Brazil and India will continue to develop smart order routing capabilities as they gear up for a surge in algorithmic trading. This will be driven in part by the organisations that have managed to slip through the Volcker Rule system, brought in post the sub-prime mortgage collapse to restrict the amount of money banks can invest in hedge and private equity funds in order to safeguard the system from risky market speculation. Therefore, by turning their attentions towards more sophisticated smart order routing technologies, investment firms in emerging markets can avoid this regulatory risk by using algorithms to get the best results without moving the market, enabling them to access hidden liquidity.

However, it is not all straight forward for those looking to get aggressive around HFT in emerging markets. The procedures for regulatory approval around algorithmic trades are highly complex in certain markets. Take the National Stock Exchange (NSE) of India.  An organisation trading at high-speed in India must prove to the NSE that they have certain risk precautions in place. This is in addition to fully demonstrating the full nature of the trade to the exchange.

It is a question of when, not if , emerging markets will fully embrace the benefits of algorithmic trading in 2012. In every emerging market, a growing proportion of trading is conducted at high-speed and nothing except a blanket ban will prevent the practice from being adopted elsewhere. While there are a few barriers to overcome for the likes of India, when it comes to algorithmic trading, the genie is well and truly out of the bottle. If the model continues to work in Europe, why should emerging markets not adopt the same approach as the search for more liquidity gathers pace?

Subscribe to our newsletter

Related content

WEBINAR

Recorded Webinar: Unlocking Competitive Edge with Outsourcing and Managed Services in Trading Technology

Outsourcing has emerged as a strategic solution for capital markets firms as trading technology infrastructures become more complex, data volumes grow exponentially, and regulatory pressures intensify. .By leveraging third-party expertise, firms can optimise operations, reduce costs, and focus on innovation in their trading technology stack. Outsourcing potentially enables firms to scale seamlessly, meet regulatory reporting...

BLOG

Fifteen FIX Engine Technologies to Consider in 2025

FIX engines, the workhorses of financial messaging, are quietly undergoing a continuous transformation. First developed in the early 1990s by Fidelity Investments and Salomon Brothers to standardise electronic equity trading, the FIX (Financial Information eXchange) Protocol quickly became the global standard for order and trade messaging across asset classes. Rather than commoditised infrastructure, today’s FIX...

EVENT

RegTech Summit New York

Now in its 9th year, the RegTech Summit in New York will bring together the RegTech ecosystem to explore how the North American capital markets financial industry can leverage technology to drive innovation, cut costs and support regulatory change.

GUIDE

AI in Capital Markets: Practical Insight for a Transforming Industry – Free Handbook

AI is no longer on the horizon – it’s embedded in the infrastructure of modern capital markets. But separating real impact from inflated promises requires a grounded, practical understanding. The AI in Capital Markets Handbook 2025 provides exactly that. Designed for data-driven professionals across the trade life-cycle, compliance, infrastructure, and strategy, this handbook goes beyond...