London – 18 January 2021: Three-quarters of proprietary trading firms are expecting to start taking market data from or begin trading on an emerging market or frontier exchange in 2021, a study by Acuiti has found.
The report, which was commissioned by Avelacom, found that 85% of senior proprietary trading respondents are interested in trading emerging markets and 74% are expecting to start taking market data or begin trading on a new emerging or frontier market over the next 12 months.
China is highlighted as the country of most interest with 56% of respondents planning to connect or take market data from an exchange in China over the next 12 months.
India is also flagged as of particular interest for 52% of respondents, albeit it with additional barriers to entry as a result of difficulties in accessing onshore markets via an international GCM. This is leading to greater interest in the “offshore” hub in Gift City as an entry point.
Saudi Arabia is also a key new market for both proprietary trading firms and the GCMs that clear them, driven in part by Saudi Arabia’s stock market, Tadawul, launching its derivatives market in August 2020.
In South America, Brazil and Mexico were highlighted as key markets of interest.
The senior executives surveyed in the report said that the two key drivers of interest in emerging markets were diversification (65% of respondents) and arbitrage opportunities (62% of respondents).
The report also contains an analysis of the top 100 fastest growing contracts by contract volume based on data collated by the FIA and finds that 69% were in emerging markets.
However, while the benefits are clear, firms also state significant barriers to entry including:
- Lack of provision of access from clearing providers (62% of respondents).
- Cost of IT infrastructure deployment at an exchange (59%)
- Uncertain regulations (57%)
- Cost of market data (46%)
- Lack of understanding of market rules (38%)
Will Mitting, founder and managing director of Acuiti, said: “Our survey found very strong demand from proprietary trading firms to trade emerging and frontier markets.
“Over the past decade, companies like Avelacom have made it far easier for firms to enter new markets and brought down the cost of access. Such firms are likely to see increased business in the medium and long-term from international proprietary firms as they take advantage of simplified regulations, increased trading hours and a growing technology infrastructure.”
Commenting on the report, Aleksey Larichev, CEO of Avelacom said, “Proprietary trading firms have long sought diverse revenue sources and the growth of derivatives markets in emerging market is an opportunity for them to diversify their markets and access arbitrage opportunities, particularly at times when established markets are quieter.
“Avelacom is responding to this market demand by providing a ready-built infrastructure, new connectivity options and market data solutions for financial institutions that want to expand geographically.”
The full survey can be found here https://www.acuiti.io/props-look-to-emerging-markets-for-edge/
For more information, contact Will Mitting
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. At Acuiti, we believe in quality, not quantity. We provide 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 is a high-performance connectivity and IT infrastructure solutions provider for the financial services industry. Its solutions are designed to improve market making, arbitrage and liquidity aggregation strategies, all of which are highly sensitive to latency, jitter and other data transfer issues. The company’s strength comes from its own global network that connects to an impressive 80+ liquidity sources offering best-in-market latencies and 99.9% uptime. Avelacom’s flagship products include: ultra-low latency connectivity, co-location, Infrastructure-as-a-Service (IaaS), market data and order routing, which help to facilitate cross-border and multi-asset trading across equity, commodity, FX, crypto and derivatives markets.