Algo Wheels Gain Steam

10th April 2019

Algorithm wheels, the automated selection of sell-side algos, is heating up, but the buy side needs to set their performance expectations, according to speakers during the FIX Trading Community’s Americas Trading Briefing 2019 in Lower Manhattan.

A recent study conducted by industry analysis firm Greenwich Associates found that only about 22% of buy-side firms are using algo wheels, according to Richard Johnson, vice president, market structure and technology at Greenwich Associates and who spoke at the conference.

“We hypothesize that the use of algo wheels will increase significantly,” he said. “It will go from a fifth to the majority in a few years. I think the amount of flow going through the wheels is going to increase significantly as well.”

When polled by Emiko Kamoda, managing director, COO of global electronic execution services at Goldman Sachs and the co-chair of the Americas Regional Committee at FIX Trading Community, regarding how much of buy-side order flows eventually will go through algo wheels during a separate panel, the audience was bullish.

Over half the audience (51%) thought that algo wheels would direct 60% of order flows. A little over a quarter of the audience (27%) estimated that 90% of order flows would eventually go through algo wheels while only 21% believed it just would be 40% of order flows. Read full article here