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Volatility will Drive Equity Markets towards Digital Transformation

The percentage of US and European equity trading, covering cash equities and equity derivatives, that takes place electronically has plateaued as a percentage of total market volume. While the high-frequency trading (HFT) share of the market has declined since the 2008 financial crisis, this decline is levelling off in both the US and Europe, with US equity markets remaining ahead in terms of total market volume executed via HFT. Since 2008, algorithmic trading continued to capture an incrementally larger share of the electronic equity markets. The regulatory environment that has shaped equity market structure since the 2008 financial crisis pushed trading towards electronic mediums, such as swap execution facilities, multilateral trading facilities and organised trading facilities, ensuring the expansion of algorithmic trading and bringing the efficacy of dark trading venues into question. At this point, equity market structures are not expected to further undergo such fundamentally significant changes as a consequence of regulations.

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