In 2017, JP Morgan researchers estimated that only around 10 percent of equities trading was done manually. The other 90 percent was done via automated, electronic trading systems.
It’s a trend that is stretching around the globe and across different asset classes. And, if a new report from Thailand is to be trusted, it could be damaging securities brokers’ profits.
Paiboon Nalinthrangkurn, chairman of the Federation of Thai Capital Market Organization, said on Monday that the increasing number of automated trading systems is hurting securities brokers in the south-east Asian country.
According to Nalinthrangkurn, companies using electronic trading systems pay far lower fees than their manual trading counterparts.
The Association of Securities Companies (ASC), a representative body for Thai brokers, also said on Monday that earnings were down by 72 percent in the first quarter of this year. The ASC partly attributed that decline to the lower commission fees paid by companies using high-frequency trading systems.
KVB PRIME Gains Key UK Influence by Sponsoring Major Finance ConferenceGo to article >>
“Hard to compete with machines”
Aside from the decline in profit, there has also been an apparent downturn in the number of retail traders in the Thai market. An article by the Bangkok Post on Monday attributed that downturn to high-frequency traders.
“The brokerage industry is facing one of its toughest times,” the Post quoted Montree Sornpaisarn, chief executive officer at Maybank Kim Eng Securities Thailand Thailand, as saying.
“A lot of our retail customers have stopped trading because they are frustrated with the effect of high-frequency and machine-generated trading.”
The Thai outlet even noted that one local investor, Watchara Kaewsawang, had ceased using short-term strategies. Though he is an individual trader, Kaewsawang is a ‘big fish’ in Thailand and is thought to have $32.5 million in assets.
“I’ve stopped most of my short-term trading strategy,” he said. “It’s hard to compete with machines that place orders at lightening [sic] speed.”