High Frequency Trading in Emerging Markets

In a recent press release, the prestigious Istanbul Stock Exchange announced it will venture into new territory around electronic trading and  algorithmic trading. This is in an effort to attract more traders and investors from the international community to invest in the country.

Under the terms of this new structure, many trading firms and hedge funds from around the world will be able to transact more business more efficiently. In addition, the sell-side brokers and intermediaries will now be able to provide direct access electronically into the exchange from their international customer base. This kind of service is known as Direct Market Access or DMA.

The exchange will also be decreasing the tick size of some of its contracts, in a further bid to attract more algorithmic trading. This move is likely to get the attention of international high frequency traders, who prefer to deal in smaller tick sizes as it presents them with more trading opportunities.

Aside from this, the Istanbul stock exchange has also made a decision to protect the confidentiality of buyers and the sellers under new anonymity rules. Again, this will help high frequency and algorithmic traders, who typically do not like to “show their hand” when conducting their trading strategies.

In connection with this, exchanges in other developing nations have also chosen to introduce similar measures, such as Brazil, Mexico, and several Eastern European exchanges in order to attract the high frequency and algo traders. Quantitative traders and investors are also good candidates for these new measures.

It is expected that a growing number of brokers will provide DMA access into these exchanges. Markets all over the world are becoming more interconnected, especially when it comes to electronic trading. By joining the nations who have already opened up access, emerging markets like Turkey, Brazil and Mexico are likely to see a strong growth in high frequency trading.

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