The Proprietary Trading Management Insight Report is free to read for executives at prop firms, to request your copy visit https://www.acuiti.io/proprietary-trading-managers-report-q2-2022
London – 18th May 2022: Listed energy and commodity derivatives markets experienced major liquidity issues during the February volatility while crypto derivatives remained liquid, a new report has found.
Following Russia’s invasion of Ukraine, global bourses were sent into a tailspin with volatility not seen since the early days of Covid gripping markets.
According to the Q2 2022, Proprietary Trading Management Insight Report, produced by Acuiti in partnership with Avelacom, energy and commodity markets experienced the most liquidity issues.
The report, which is based upon a quarterly survey of Acuiti Expert Network of over 100 senior proprietary trading executives, found that a third of respondents experienced major liquidity issues in energy and 29% in commodities.
Just 21% of respondents said that they experienced no liquidity issues in commodities during the volatility. Comparatively 78% of respondents experienced no liquidity issues in crypto currencies.
As a result of the volatility experienced in Q1, proprietary trading firms said they intended to make structural changes.
Some 38% said they were planning on changing the parameters of their algos while 21% said they were reducing their long-term risk limits and 19% said they were increasing their network capacity.
“The Q1 market volatility in energy and commodity derivatives has now extended more broadly to equities, fixed income and crypto,” said Aleksey Larichev, CEO of Avelacom. “A key technology finding of this report is that firms recognize the importance of enhancing their network capacity at times of market volatility.”
The report also found that sell-side clearing operations performed significantly better than in the previous spike in volumes around the initial outbreak of covid. Under a third of respondents reporting late statements from their clearing firm with just 3% reporting frequently late statements.
However, the impact of the high volumes is being felt by firms with around three quarters reporting higher or significantly higher initial margins. This has resulted in firms putting in place more stringent cash management as well as over a quarter of firms saying that the higher margins will impact profitability.
“These are very challenging times for capital markets globally,” said Will Mitting, founder of Acuiti. “While many lessons have been learned from the volatility of 2020, there remain liquidity and margin pressures on proprietary trading firms during market disruptions.”
For more information, contact Nastja Konic at Acuiti
Tel.: +44 (0) 203 998 9190
Acuiti is a management intelligence platform designed to provide Senior Industry Professionals in the Derivatives Industry with high-value insight into industry-wide performance and business operations. Acuiti provides a platform through which our exclusive network of Senior Industry Executives can share and source information on day-to-day operational challenges, providing them and their management teams with increased transparency and in-depth analysis to make more informed decisions and benchmark company performance. Financial Institutions benefiting from our services include Banks, Non-bank FCMs, Brokers, Proprietary Trading Firms, Hedge Funds and Asset Managers.
Avelacom’s low latency connectivity, IT infrastructure and data solutions improve market making, arbitrage and liquidity aggregation strategies, all of which are highly sensitive to latency. It provides access to 80+ liquidity centers offering best-in-market latencies and 99.9% uptime. Covering a wide variety of exchanges including equity, FX, commodity, crypto and derivatives, Avelacom’s solutions are asset neutral.
The company is particularly well known for offering the lowest latencies to/from APAC, LATAM, the Middle East, South Africa and Eastern Europe. The company’s strength comes from its own global network based on both fiber and wireless technologies.