Algorithmic trading has been on the rise since the early 2000s and now accounts for roughly 70% of orders in some markets. This growth is due to technological advancements, such as improved computing power, lower storage costs, and the integration of AI and machine learning. In the capital markets sector, cost considerations, competitiveness, regulatory obligations and profitability are key incentives to trade using algorithms.
Algorithmic trading, however, entails risks stemming from potential failures of algorithms, IT systems and processes. In recent years, several major algorithmic trading failures have resulted in substantial losses, fines and reputational damage for investment firms.
