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18th October 2019 | Article

Banks cut derivatives cost base at fastest pace

More than half of bank respondents reported lower cost bases over the past six months, the latest Acuiti Insight Report has found.

Other key findings this month:

  • Pace of revenue growth across the global derivatives market drops but remains strong
  • Industry sentiment falls from August highs
  • Proprietary trading groups reported the most favourable business conditions in September
  • Cost bases in Europe are rising at the fastest pace

London — 18 October

Cost bases at banks are falling in contrast to other company types in the derivatives market as firms cut the cost of their operations and reduce headcount, the latest Acuiti Insight Report has found.

57% of respondents from banks to the latest Acuiti survey reported falls in cost bases over the past six months in marked contrast to other company types where costs were rising.

Just 5% of respondents from proprietary trading firms and the buyside said that the cost base had fallen while 45% reported an increase.

The impact of regulation continues to dominate cost increases across both the buyside and the sellside.

Rises in headcount accounted for a significant increase among proprietary trading groups in a positive sign for the market.

However, proprietary trading groups were also more likely to report higher costs from exchanges and existing service providers.

Each month, Acuiti polls its global network of senior executives in the derivatives market to compile the Derivatives Insight Report, a benchmark of industry performance, key trends and executive sentiment.

The latest report found that sentiment in the industry fell back from its peak last month with 53% of respondents predicting an increase in revenues over the past three months, down from 63% the previous month.

Revenue growth across the global de­rivatives market dropped but remained strong last month with 39% of re­spondents to the October Acuiti survey reporting higher month-on-month revenues and 43% reporting a better year-on-year performance.

These figures come off the back of an exceptionally strong August in which 48% of respondents reported higher month-on-month revenues, the highest showing to date.

Three major events drove volatility during the month. The attacks on Saudi Aramco’s oil facilities drove record volumes in energy with ICE reporting record volumes of 6.33m lots in energy futures and options on 16 September smashing the previous daily record of 4.89m in November 2018.

The return of QE in the EU had a similar impact on Bund options on Eurex causing a spike in volatility and abnormally high volumes in the contracts.

Meanwhile, ongoing uncertainty over Brexit saw the continuation of sus­tained volatility in GBP and interest rates in the UK, positively impacting revenues for many firms and resulting in record Sterling options volumes on ICE.

Acuiti was launched in February 2019 and to date over 550 senior executives in the derivatives market have joined the platform.

To apply to join the Acuiti network and get the opportunity to take part in and receive next month’s Acuiti Derivatives Insight Report, visit acuiti.io

 

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For more information, contact Will Mitting

Tel.: +44 (0) 203 998 9190

Email: willmitting@acuiti.io

 

About Acuiti

Acuiti is a management intelligence platform designed to provide senior executives with unparalleled insight into business operations and industry-wide performance. Acuiti helps identify market trends, enhance decision-making and benchmark company performance. The platform anonymises and aggregates information from its exclusive network of senior industry figures to provide insightful in-depth analysis.