Divining the ratio of manual versus algorithmic traders, per product

A

applejuice

Hi ET,

I’ve had a few very early ideas as to what might help reveal the ratio of manual vs algorithmic traders on any given product, but until I do further research I’m not sure how sensible these ideas are and I may be barking up the wrong tree entirely.

For that reason I’d welcome additional input.

I guess I’ll start by looking at:

1) “Obviousness of product” - ranking the interest for particular products on various trader forums (Perhaps a high degree of interest may signal it is swamped with algorithms, e.g. ES?)

2) Daily trade volume relative to some other tbc metric (My logic being relatively “high” volume may signal presence of churning algorithms)

3) Margin requirements (high margin requirements might encourage/discourage algorithmic trading more so/less so than manuals)

4) Product volatility (As I suppose margin requirement is a function of volatility)

5) “Maximum transaction cost advantage” (or in plain english, the difference between the fees the most sophisticated players pay per trade versus the retail crowd. A small difference might attract fewer sophisticated players and therefore fewer algorithms)

6) Typical thickness of the order book (Is a product with 5000 contracts on the bid and offer more or less likely to be swamped with algorithms?)

7) Length of trading session (Believe I read some ag product/s recently trimmed down the session to only several hours... does that indicate it is a product tailored to humans who need sleep?)

Any guidance gratefully received
 
applejuice ( :rolleyes::):D),


4) how do you know that margin requirements are function of volatility?

5) for this, where/how would you get the costs? I assume the advantageous fees as on an adoc basis ; so how would you find out?

6) I am here thinking of bond futures. Any idea how much automated this market is ?
For some reasons, I always assume that those into bonds are more "senior" than say into indices for instance.

for 2) why do you assume so?

I am really questionning the basis on which you draw your conclusions.
If the assumptions are wrong, well....
 
Hi thanks for response.

The basis for my assumptions:

4) Just my observation that retail brokers expect more margin for more volatile products and it makes logical sense to me also.
If I were a sophisticated player I think I'd favour a product where the barriers to entry for less sophisticated players are low, and where I can do huge size.

5) Agreed, transaction costs may be ad hoc basis. But pretty sure there's info on the net for the benefits on offer from owning seat on exchange, so that could point me in the direction of what the sophisticated players are paying. Then tally that against a bunch of retail brokers, most or all of whom post commission schedules on their websites.

6) I really couldn't say if fixed income attracts more or less - I have no real clue.

2) CNBC constantly harp on about how exchange volumes being high but a lot of it is non-productive churn. So I assume big volume can be a symptom of algo-swamp.

As I mention at the outset, these are just my starting point ideas and the reason I have posed the question here is to receive answers.
 
hmmm : the messaging limits : interesting thing.
can you put a link of some examples on some exchanges say on indices, bonds futures.
just to see.
 
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