Is algorithmic trading the future for credit?

Algorithmic trading has taken the equity market by storm and is rapidly gaining a following in foreign exchange. Laurence Neville asks whether the conditions are right for it to flourish in credit

Algorithmic trading means a variety of things to different people, but in its broadest sense, users rely on algorithms - complex mathematical formulas - to decide when financial instruments should be bought or sold according to a pre-defined strategy.

Often interpreted simply as automated trading, a computer model rather than an individual, decides when to buy or sell a stock, security or asset. That decision might be triggered when a stock, security or asset hits a certain price - or when the