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Business confidence across the global derivatives market continued to rise this quarter as volatility gripped global markets and some exchanges posted record volumes, the SGX Global Market Sentiment Index, a barometer of sentiment from across the global derivatives market, has found.
The Sentiment Index is produced by Acuiti and based on a quarterly poll of Acuiti’s Expert Networks, comprising senior, derivatives-focused executives from hedge funds, asset managers, proprietary trading firms and the sell-side. Each quarter, Acuiti surveys Expert Network members on their outlook for the next three months to compile the index.
This quarter, the index posted its third consecutive quarterly rise to a reading of 78, up from 72 in Q4 2024.
This increase was driven by the sell-side where business confidence from both clearing and execution-focused executives rose to record levels. Proprietary trading firms and hedge funds also posted sentiment increases. Asset managers, however, saw declines in confidence.
Regionally, confidence was driven by increases in North America and Europe, while the outlook in APAC was more cautious. Overall, the index for respondents in APAC sat at 72, only a marginal increase on last quarter’s level of 67. The North American index meanwhile was at 82.
“The second term of President Trump started with a bang in terms of volatility on global derivatives markets,” says Will Mitting, founder of Acuiti. “For institutions that are volume based, such as sell-side clearing firms and proprietary trading firms, volatility brings significant opportunities to grow revenues.
“However, the growing optimism is not universal with executives in APAC and those from asset managers recording less optimism about the quarter ahead.”
“Volatility is driving a marked increase in capital flows into and across our pan-Asian waterfront. Our total derivatives traded volume saw month-on-month increases since the start of this year, with a 17% year-on-year hike in February. We are seeing more global investors seeking to benefit from portfolio margining capital efficiencies as they diversify into highly liquid asset classes,” observed Rama Pillai, Global Head of Sales at SGX Group.
This quarter, the report also takes a look at how volatility is impacting firms across the global market.
The data finds that, while volatility is highly positive to most company segments, it is posing challenges from higher margin requirements to liquidity and market access issues.
In response to recent market trends, firms are turning to automation and technology. This is particularly important for the sell-side – 82% of whom said that they were deploying this strategy as they seek to boost capacity and risk management.
Firms were also adopting new risk management frameworks and expanding into new instruments. Proprietary trading firms were seeking to capitalise on the opportunity by increasing their exposures to high-volatility markets.
The next SGX Global Market Sentiment Index Report will be released in June 2025.
To download the full report, please visit https://www.acuiti.io/the-sgx-global-market-sentiment-report-q1-2025-2/
