Futures Trading Platforms: The Evolution of Point and Click Trading

The futures markets have become complex. Market structure, trading strategies and investor participation are all under radical transformation. What was once a regionalized market for locals has evolved into a dynamic trading bazaar with activity emanating from each and every corner of the globe. What is the grease lubricating this global liquidity? Sophisticated trading systems providing access to data, connectivity, and the analytics that provide traders with the tools they need to trade in liquidity pools around the world.

The skill set required to be a successful future’s trader is far different today than it was several years ago, especially for markets that have migrated to screen-based trading. It is no surprise that many of the most successful pit traders of the past are now far removed from the industry and have turned to other occupational pursuits as varied as driving cabs, authoring get-rich trading books, or playing poker in the casinos of Joliet. Bits and bites flickering on a computer screen are inanimate and do not lend themselves to psychological analysis as is the case in the pits. But they do lend themselves to systems that can quickly analyze and manage the data that flow through electronic interfaces.

Powerful trading functionality that was once the exclusive domain of no holds barred proprietary trading desks and large market makers will continue to become more common on the trading desks of small independent traders. But just because they have the same level of technical capabilities and access to markets does not mean that the old-style traders will succeed and prosper. A trader that was wildly successful in the voice-brokered pits of the past may not necessarily adapt to the intricacies of electronic trading.

The capabilities offered through enhanced technology applications has been a driving force behind the exponential growth in trading volumes in recent years and its impact will continue to drive futures trading volume to record heights for the foreseeable future. Compound annual growth rates of 27% were once seen as an aberration, but TABB Group estimates that trading volume will continue to experience steady growth over the next the next several years, growing by 30% annually through 2010. The continued growth of the futures markets bodes well for a broad swath of
the industry. Exchanges, technology vendors, market makers and professional traders will all benefit from the volume growth and transition to an electronic marketplace. However, electronic markets will pose a challenge to trading strategies that are designed for today’s market velocities, as they may not be able to replicate the success in the faster markets of the future. As volumes grow and trading velocity increases, market participants will need to adapt by leveraging technology to manage the new electronic market structure that will emerge.

The TABB Group study on Futures Trading Platforms: The Evolution of Point and Click Trading

This report is based on conversations with professionals representing futures operations at investment banks, hedge funds, investment managers, exchanges, and trading platform vendors. The report looks at how front-end trading screens have become the preferred method of trading futures instruments and examines how they have evolved to become powerful trading systems providing automated trading functionality directly at the trader’s fingertips. It also examines the functionalities provided by today’s trading systems and provides insight into spending trends for technology that enables traders to operate in today’s supercharged trading environment.