More and more hedge funds are choosing to split their execution across multiple algo providers, according to The TRADE’s most recent Algorithmic Trading: Hedge Funds Survey.
The 2025 report found that using a diverse variety of brokers for algorithmic trading increasingly appears to be the norm, with almost 70% of firms surveyed using two or more providers.
Specifically, 41% use five or more providers, compared to 31% who leverage a single provider.
The survey also revealed that larger firms tend to utilise multiple providers, with the largest year-on-year increase of providers used stemming from firms in the $10 – $50 billion assets under management (AUM) band, noting an increase of 0.84 algo providers.
Similarly, firms with an AUM between $1 and $10 billion recorded a growth of 0.52 providers, bringing their total up to nearly five providers per firm.
The findings indicate an increased focus on risk management and performance strategy for larger firms when it comes to algorithmic trading, amid market volatility and growing complexity in financial instruments.
Moreover, the survey also forecast a further increase in the average number of providers used in years to come, as buy-side firms begin to adopt more algorithmic trading tools in the fixed income and FX markets to manage their risk more effectively.
‘Speed’ showing a slow down
As larger firms increasingly elect for multiple providers, the key drivers behind algorithmic usage are also changing across the buy-side.
While the need for ‘higher speed and lower latency’ has in the past been a top factor for hedge funds, this category noted the steepest decline in this year’s survey, recording a 1.81% drop from 2024.
Conversely, ‘greater anonymity’ saw the largest jump among usage factors, totalling 9.49% of responses, an increase of 2.47%, indicating a potential growing need for reduced implicit trading costs as the ‘race for microseconds’ in algorithmic trading loses traction across the industry.
‘Ease of use’, ‘reducing market impact’, ‘consistency of execution performance’ and ‘increasing trader productivity’ were also highlighted as top reasons for algorithm usage by the survey’s respondents.
Reflecting on this, it appears that priorities in the algorithmic trading sphere are shifting every year, as the buy-side increasingly adapts its needs as the space continues its rapid evolution.
The full 2025 survey can be accessed here.