The interdealer-broker (IDB) industry is now worth US$7 billion and exhibits all the signs of being a mature market, finds analyst Celent in its latest report Evolution of the Interdealer Broker Industry: Smells Like e-Spirit.

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Market participants’ growing focus on electronic trading, risk management and cost control is driving the record growth in global foreign exchange (FX) markets, finds the new Global FX Market Study commissioned by CME. The study confirms that “electronic trading venues need to provide state of the art execution and post-trade services”, according to Derek Sammann, managing director, CME Group FX products.

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Direct market access (DMA) accounts for 15-18 per cent of equities share volume in the US, and this will increase to 20 per cent by 2010, gradually replacing manual executions. In Europe, DMA flow for equities will grow from eight per cent of traded value to 15 per cent in 2011. So suggests new research from analyst Celent. A contributing factor to DMA growth in Europe will be the demand for greater venue aggregation to cope with the proliferation of alternative execution venues, the analyst adds.

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Equity post-trade transaction cost analysis (TCA) usage among US and European firms could reach nearly 90 per cent by 2009, with 38 per cent of those firms examining TCA on a daily basis, according to a study by Tabb Group.

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According to Tabb Group in a new industry study, U.S. Equity Market Structure: Driving Change in Global Financial Markets, there are more than 55 different venues vying to match buyers and sellers and trade US equities electronically. Larry Tabb, CEO and founder of the capital markets research and advisory firm, says the US financial markets are in “full-out, no-holds-barred, free-for-all radical change”.

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There are no great surprises in the results of the Securities Industry and Financial Markets Association’s (SIFMA’s) first European Equities E-Trading Survey, but the findings provide useful confirmation of marketplace trends. More than half of both buy and sell side respondents report that they now execute more than 80 per cent of their trades electronically. But e-trading, while established for large and mid caps, is less well so for small caps and block trades – and voice broking is still preferred for equity derivatives.

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The Securities Industry and Financial Markets Association (SIFMA) has released the results of its Third Annual European Fixed Income E-Trading Survey. Despite the credit crisis, market participants reported an increase in fixed income e-trading volumes in 2007 with 53 per cent of buy side respondents reporting that they were trading more than 60 per cent of their fixed income volumes electronically. This is compared to only 38 per cent of respondents saying they traded above the same level in 2006.

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The age of electronic bid/offer markets in securities lending may not be so far off after all, finds new research from Vodia Group. The growth of screen-based trading platforms – the equivalent of exchanges or ECNs – in securities lending is predicted by almost every professional in the business, but most participants have viewed this as something that will occur in the far future, Vodia says.

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Expenditure on trading technology in the UK is forecast to reach £3.4 billion in 2008, according to the 20th annual UK Dealing Room Survey, published by Kimsey Consulting. The survey forecasts an overall rise of around four per cent in 2008, compared to the estimated 10 per cent increase in 2007.

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With nearly half of all futures markets trades in 2007 currently transacted through automated trading strategies – including market making and quantitative black-box trading activities – and this figure estimated to reach 90 per cent of total activity by 2010, the market for automated trading systems capable of managing sophisticated trading demands will continue to grow, predicts analyst Tabb.

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Foreign exchange trading executed electronically will approach the 80 per cent mark by 2010 – up from 62 per cent at the end of 2006 – driven by investment managers seeking best execution across asset classes and an increased tendency for the deployment of FX algorithms on traders’ desktops, a new Tabb report predicts.

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With buy side use of algorithms shifting rapidly as brokers deliver an expanding range of customisation services and “modularised” solutions to allow greater control and enable different electronic trading components to be managed, a study predicts that at least 30 per cent of all algo flow will be sent via customised strategies by the end of 2008.

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Levels of equity trading executed though so-called dark pools or ‘non-displayed’ liquidity venues in Europe are set on an upward trajectory similar to that currently being experienced in the US, reckons Joe Wald, CEO of agency-only broker EdgeTrade. “It’s going to grow so profoundly in every electronic market – not just in the US, but in Europe as well,” he says. Speaking to Electronic Trading following a “whirlwind” first six months of 2007, Wald suggested that the firm had probably seen more developments in the past half year than during the past few years combined.

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While the days of traditional trading may be long gone and electronic trading is on the rise, it would be wrong to assume that the need for voice communication has diminished, a new study says.

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Research from TowerGroup finds that spending on IT across the global exchange market is growing more slowly than expected given the massive changes the industry faces. TowerGroup estimates exchanges globally spent $2.72 billion on IT in 2006 and that this spending will grow at a rate of 3% through 2009 – 4% in 2007 and then slowing to 2-3% from 2007 to 2009. Spending in the US is growing the slowest, with Europe growing moderately and Asia growing the fastest.

While there are risks associated with the proliferation of hidden liquidity, the economic benefits for institutional traders are real. So says a new Tabb Group research note, Groping in the Dark: Navigating Crossing Networks and Other Dark Pools of Liquidity. When dark pools are successfully navigated, they can minimise information leakage, manage market impact and execute block trades at beneficial prices. By the end of 2007, Tabb says, dark pools will capture 512 million share executions per day. The volume of non-displayed liquidity execution will triple to 1.5 billion a day in 2010, more than 15 per cent of total equity market share.

A Bank of America commissioned survey of head traders at 30 buy side institutions has found a relatively high market penetration for automated options trading. Sixty-one percent of respondents indicated that they traded some portion of their options holdings electronically, compared with just 39% who rely solely on the telephone. Respondents who execute electronically tend to trade more than 70% of their total order flow in an automated fashion.

The Bond Market Association has released the results of its first Electronic Trading Survey for the European fixed-income marketplace. Among the toplevel results were the basic agreement among all survey participants – which included sell-side and buy-side users and trading platform operators – that the migration toward electronic markets will continue. The survey found that 41% of buy-side participants expect their use of electronic trading to increase significantly over the next 12 months, while almost 30% of their sell-side equivalents expected the same. A panel discussion of the survey findings among representatives of platform operators Thomson Tradeweb, Bloomberg, Reuters Trading for Fixed Income, MTS and MarketAxess suggested that volume will migrate to electronic platforms as long as the sell side provides prices and the buy side has the appetite, as identified in the survey, for shifting to electronic facilities for specific instrument types. The survey also found that 24% of buy-side respondents were unhappy with their electronic trading relationships with their sell-side counterparts.

Use of direct market access (DMA) capabilities is expected to more than double over the next two years, reaching 11% of order flow for buy side users in Europe, Canada and Asia, according to a new report from Tabb Group. The report also suggests that order routing through electronic execution systems will triple by 2007.

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“Cross-asset class trading is an idea whose time has finally come,” believes Financial Insights, whose report – The FIX Is in for Cross-Asset Class Trading – looks at tools for supporting auto-hedging cross-border equities and foreign exchange. Certainly, in its information-gathering activities, A-Team Group, publisher of Transaction Networks & Technologies, has seen growing momentum in the area, be it from expanded capabilities from the likes of Goldman Sachs Algorithmic Trading or planned cross-asset initiatives from the major connectivity technology providers. The Financial Insights study examines current business practices sell-side firms are using to support their clients cross-asset class trading needs.