Algorithmic trading is the use of computer programs or very advanced mathematical models and sophisticated trading analytics to execute orders according to a pre-defined strategy. The recent proliferation of algorithmic trading stem from the growth in quantitative trading and risk management techniques, the industry’s relentless drive for efficiency through automation and advancements in technological infrastructure.

Algorithmic trading allows the break up of large orders into bite sizes and feed them directly into the market, or through DMA (Direct Market Access) broker services, so as to cause the least amount of impact on a stock's price. It uses the historical data to identify opportunities that arise when current market trading conditions deviate from historical patterns. Both the buy-side and sell-side are looking to automation to improve trading performance and increase productivity while lowering costs. Automation has replaced human beings, which some banks have already jettisoned some staff, mostly the traders, as most of the trades are made with algorithms.

The US banks are targeting both Europe and Asia for expansion in algorithmic trading, as the market for algorithmic trading in US is now maturing.

The growth of algorithmic trading and front as well as back-office functions among Asian financial institutions is spurring massive demand for programmers.

The increase in technology investment over the last 12 to 18 months in Asia resulted in an increased demand for developers in front- and back-office roles. Top banks competing for the same people, however, the local talent pool are dwindling, as a result, remuneration packages have been increasing in order to attract and retain staff.

Sources:
http://www.businessweek.com/magazine/content/05_16/ b3929113_mz020.htm

http://www.fixglobal.com/back_issues/Q6/AMERICAS/Algorithmic%20trading_Q6.pdf

http://www.fixglobal.com/back_issues/Q1/ASIA%20PAC/FIX%20and%20algorithmic%20trading%20strategies.pdf