Demand for extended trading hours in derivatives markets is growing the fastest in Asia, according to a new report – The Growing Internationalisation of Derivatives Trading – by Acuiti on behalf of the Montréal Exchange, the derivatives arm of TMX Group,
The survey canvassed over 100 senior executives from proprietary trading firms, hedge funds, asset managers and the sell-side in EMEA and Asia.
It found that within Asia the interest to trade on international markets with trading hours outside the local core daytime hours was strongest among asset managers and hedge funds.
Overall, 44% of respondents based in the region traded extended hours and 26% of those that did not reported significant demand to do so.
Acuiti noted that the disruption caused by Covid-19 had delayed many plans to join new markets but as the world emerges into a new normal, the pace of adoption is expected to accelerate.
The motivation for moving to a near 24-hour cycle differed depending on the type of firm. For example, the report showed that asset managers were driven more by the requirement to hedge exposures while hedge funds and proprietary trading firms were looking to optimise strategies.
In general, the reasons were broadly split across capturing specific opportunities, the requirements of their trading strategies, ability to react to events throughout the day and hedging, according to the report.
The main concern, especially for sell-side firms, of not offering an almost full day of trading was losing the competitive edge to those firms that did.
This is because as the study found, firms were significantly more likely to trade on markets that offer extended hours.
“The world is becoming smaller in terms of firms’ ability to trade globally, and the launch of extended hours trading sessions is a key development in facilitating that trend,” says Will Mitting, founder and managing director at Acuiti.
He adds, “The appetite from firms based in Asia to increase the scope of their trading activities is striking and reflects the ever-increasing sophistication and ambition of firms across the continent.”
©Markets Media Europe 2021