Around 45% of firms which already trade FX are planning to significantly increase their exposure in the asset class as of next year, an Acuiti report has found.
The report focuses on the rising cost of trading, finding that 33% of surveyed respondents are currently reducing their presence in some markets or products as a result, with 29% highlighting that they are trading less overall due to these high costs.
As firms realign their focus, the Q4 2023 report saw FX come out on top as the area that firms were most likely to be expanding, a significant reversal when compared to 2022, where FX was an area wherein the fewest firms were seeking to expand.
Will Mitting, founder of Acuiti, said: “Proprietary trading firms are looking ahead to 2024 with optimism and planning expansion and increased investment. However, exchange costs are an increasing burden for many firms, which are trading fewer products and markets than they would if fees were lower.”
The report also found that of the areas firms are already trading, plans are to grow footprints in equity options and cryptocurrency. Additionally, looking at the trading new asset classes, several firms confirmed they plan to expand into fixed income – specifically into cash government bond markets.
Alongside this expansion, the report also highlighted that almost a fifth (mostly from Europe) of firms are planning to decrease their exposure in the cash equities asset class. According to Acuiti this “signals a worrying trend in a market already suffering from poor liquidity”.
Elsewhere, almost two thirds of firms (63%) are set to make higher than average investments, with algorithmic trading tools, connectivity to new markets, and market data the top priorities, according to Acuiti.
In addition, prop firms’ technology investments for 2024 were also expected to be ‘significantly’ above average by 23% of those surveyed, while 40% of the respondents confirmed a ‘slightly above average’ increase in investment.
Aleksey Larichev, managing director at Avelacom, said: “The report reveals that proprietary trading firms are willing to invest in improving their connectivity to markets, including exploring new ones. This shows their plans to expand and optimise their current trading setups. It’s a positive sign that the market is in good shape and working to stay competitive.”
The Q4 ‘proprietary trading management insight report’ surveyed senior executives across more than 100 firms across the globe, in partnership with Avelacom.
