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Proprietary trading firms have reported challenging conditions in the first half of 2023, on the back of a drop in volatility, rising costs and increased regulation, the latest quarterly Proprietary Trading Management Insight Report has found.
The report, which is based upon a quarterly survey of the Acuiti Proprietary Trading Expert Network, a group of senior proprietary trading executives from across the globe and produced in partnership with Avelacom, found that 61% of firms reported a worse performance than in H1 2022 and 49% said that their business performance in H1 2023 had been worse than an average year.
The relative lack of volatility compared with H1 2022 was the main factor in the poor performance. The percentage of respondents that cited lack of volatility as a significant or critical challenge rose from 4% last year to 51% this year. Regulation was also cited as a greater challenge this year than in the same period last year.
However, despite the challenges firms faced in the first six months of the year, sentiment is improving. Last quarter, the Acuiti Proprietary Trading Sentiment Index reached an 18-month low of 41. This quarter saw an increase to 58 – still low by recent standards but a significant improvement from the previous month.
Other key findings in this quarter’s report:
- Listed interest rates were the best performing asset class in H1 2023 while commodities, energy and FX struggled
- Strategies traded on exchanges in Asia were the best performing with those in the EU and UK the least profitable
- Proprietary trading firms that are currently trading crypto remain bullish with 63% expanding their operations and none currently retrenching from the market
- Two thirds of proprietary trading firms that do not trade crypto would at least consider doing so once regulatory frameworks have been established
“After an exceptionally volatile six months in the first half of last year, it is no surprise that proprietary trading performance has dipped during 2023,” says Ross Lancaster, head of research at Acuiti.
“However, it is encouraging that sentiment is rising among managers of proprietary trading firms, which suggests that the second half of the year might bring a reversal in performance.”
“In times of subdued volatility, proprietary trading firms are looking for ways to trade profitably,” says Aleksey Larichev, co-founder & managing director of Avelacom. “We are helping many clients access markets around the world, with the lowest possible latencies, in order to help them find new opportunities. It is also encouraging to see the continued interest in the opportunities present in the crypto markets.”
Download full report here: https://www.acuiti.io/proprietary-trading-report-q3-2023/
