In its recent report Expanding Connectivity: Exploring the Challenges and Solution in Trading New Markets, Acuiti and BSO asked which new markets trading firms were considering adding over the next three years.
The report found strong appetite to trade new markets as trading firms look to diversify trading strategies and seize unique opportunities in new and emerging markets.
The top three new or emerging markets that firms were looking to onboard in each region were:
- South Korea
- Hong Kong
- Saudi Arabia
But while the demand to trade on new markets was strong, several barriers remain for firms looking to do so.
These barriers can be higher when firms seek to adopt emerging and frontier markets. In these markets, the exchange infrastructure and local rules and regulations can be very different to those in established markets.
For this reason, the time taken to understand the local market was the third biggest consideration for firms when making a decision on whether to adopt a new market. Bringing this time down as much as possible through internationally recognised connectivity processes can be a key advantage for exchanges seeking to attract international trading flows.
Many exchanges in emerging and frontier markets are taking steps to harmonise their connectivity requirements and exchange rules with international norms, however often this can require changes to local regulations.
Another approach from emerging exchanges is the adoption of technology from international markets. Several major exchange groups, most notably Nasdaq, have been successful in selling trading and post-trade software to emerging exchanges.
Exchanges are also taking the time to understand the requirements of international trading firms and to build products and services around them. B3 has been notable in this respect and has benefitted from a host of major proprietary trading firms connecting to the market as a result.
For most respondents, however, connecting to a new market is a cost-based analysis. It is for this reason that connectivity and market data costs were the top two considerations overall for firms that took part in the Acuiti survey.
To read the full lists and find out more about how firms are approaching new markets, download the report here: https://www.acuiti.io/expanding-connectivity/