Listed interest rate derivatives and commodities futures and options performed best for proprietary trading firms in the first half of 2022 due to volatility because of recessionary fears and soaring inflation across global markets, according to this quarter’s Acuiti Proprietary Trading Managers’ Insight Report.
The report, which is based upon a quarterly survey of the Acuiti Proprietary Trading Expert Network, a group of over 100 senior proprietary trading executives from across the globe, found that 58% of firms reported commodities trading to be either exceptionally or very profitable while over half of respondents said the same for listed interest rates.
Crypto currency trading also performed well with over half of firms reporting strong profitability in that asset class. The recent falls in crypto prices have not deterred traditional proprietary trading firms from entering the market.
Overall, 22% of respondents said that they had accelerated plans to enter the market as a result of the volatility. 13% had increased trading and just 3% had exited the market.
Overall, the sustained volatility experienced during the first half of the year has benefitted proprietary trading firms with 76% of the Expert Network reporting a better than average six months.
“Volatility has remained elevated during the first six months of 2022 and this has increased the requirement for firms to hedge and reposition,” said Will Mitting, founder of Acuiti. “Proprietary trading firms provide liquidity to listed markets and their role is particularly important during times of market stress.”
This quarter’s report also analysed technology infrastructure at proprietary trading firms and found significant levels of inhouse development across a range of functions.
In addition,it looked at third party vendors and found strong demand for more specialist risk management software that reflected the complexities of proprietary trading.
“Ultra-low latency firms have the most unique requirements towards technology set ups. That creates opportunities for third-party vendors that can provide services to these types of firms and cover their needs,” said Aleksey Larichev, CEO of Avelacom.