Algorithmic Trading in China: Advanced Execution Trends, Traders, and Technology

by Hua Zhang, October 28, 2011
Industry Trends
Asia-Pacific

Abstract

Celent estimates that algorithmic trading will account for about 0.6% of securities trading in China in 2011, and this figure is expected to reach 2.5% in 2013. The use of algorithmic trading is still minimal in the A-share market; the situation is slightly more optimistic in the B-share market. On the other hand, algorithmic trading is actively used in the stock index futures market.

In a new report, Algorithmic Trading in China, Celent examines the market size, investor segments, regulations, software providers and market data vendors supporting advanced execution in China. Hedge funds and securities firms will be the main customers for algorithmic trading over the next two years. Rapid improvement will be seen in the market data services sector in order to support algorithmic and high frequency trading.

The algorithmic trading vendors active in the China market include Hundsun Technologies, SunGard, TradeBlazer, Webstock, and Tinysoft. Some Chinese vendors have also developed algorithmic trading systems in collaboration with foreign vendors and financial institutions. Hundsun Technologies, for example, collaborated with UBS and Nomura Securities.

“Algorithms used in Europe and the US cannot be directly applied to China. Certain modifications and localization are required. The main differences with these markets include order speed, market data speed, and China’s T+1 trading system,” says Hua Zhang, analyst with Celent’s Asian Financial Services group and author of the report. “Celent expects the growth of algorithmic trading in the futures market, especially in equities index futures, will exceed that of the equities market itself.”

Celent is a research and advisory firm dedicated to helping financial institutions formulate comprehensive business and technology strategies. Celent publishes reports identifying trends and best practices in financial services technology and conducts consulting engagements for financial institutions looking to use technology to enhance existing business processes or launch new business strategies. With a team of internationally based analysts, Celent is uniquely positioned to offer strategic advice and market insights on a global basis. Celent is a member of the Oliver Wyman Group, which is a wholly-owned subsidiary of Marsh & McLennan Companies [NYSE: MMC].

Media Contacts

North America
Michele Pace
mpace@celent.com
Tel: +1 212 345 1366

Europe (London)
Chris Williams
cwilliams@celent.com
Tel: +44 (0)782 448 3336

Asia (Tokyo)
Yumi Nagaoka
ynagaoka@celent.com
Tel.: +81 3 3500 3023

Table of Contents

Executive Summary

3

Market Size and Characteristics

5

 

Barriers and Drivers

6

 

Stock Exchange Technologies

9

 

Characteristics of the China Market

10

Domestic Brokers Active in Algorithmic Trading

11

Algorithmic Trading Technology Vendors in China

12

 

Guotai Junan Information Co.

14

 

Hundsun Technologies

14

 

Webstock

15

 

TradeBlazer

15

 

Kingdom Technology

17

Conclusion

18

Leveraging Celent’s Expertise

20

 

Support for Financial Institutions

20

 

Support for Vendors

20

Related Celent Research

21

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