APAC further emerges as opportunity for European prop firms and hedge funds – report

Rick Steves

APAC is the fastest growing region for listed derivatives trading volumes, and that is fueling interest in trading in the region among European proprietary trading firms and hedge funds.

A recent study conducted by Acuiti and Trading Technologies has shed light on the intentions of European proprietary trading firms and hedge funds to expand their trading activities in the Asia-Pacific (APAC) region.

The report, titled “European Attitudes to Trading in APAC,” provides valuable insights into the challenges and opportunities faced by European trading firms as they venture into these markets.

37% said APAC was more profitable than trading in European markets

The survey, commissioned by Trading Technologies ahead of its TT Connect: Asia Insight event in London, involved senior executives from 53 European-based proprietary trading firms and hedge funds. The findings revealed a growing appetite for trading in APAC markets.

Among the survey respondents, 59% already traded derivatives on APAC markets, with an additional 11% planning to do so in the near future. Notably, 37% of those trading in APAC reported that it was more profitable than trading in European markets, a sentiment particularly strong among hedge funds.

Key challenges to European firms’ expansion into APAC markets

While APAC markets offer significant potential for profits, European firms acknowledge that they face unique challenges when trading in the region. The survey identified several key challenges, including:

Finding the Right Local Partners: Establishing partnerships with local entities is crucial for navigating APAC markets effectively. Understanding local rules and regulations is equally vital.

Accessing Regional Derivatives Markets: Gaining access to APAC derivatives markets through preferred clearing firms can be a hurdle for proprietary trading firms.

However, technology-related challenges were relatively lower on the list of concerns. Third-party front office vendors have invested significantly in enhancing connectivity to APAC exchanges over the past decade, reducing the entry costs for clients seeking to explore new markets.

Key findings and market preferences

The study also revealed several key findings, including:

Japan Leading the Way: Japan emerged as the most commonly traded market in the APAC region, followed by Australia and Hong Kong.

Easiest Market Access: Singapore was identified as the easiest market to connect to, while China presented the most challenges.

Profitability in Indian Markets: Firms trading in Indian onshore markets reported the highest profitability from their APAC trading activities.

Future Potential: Equity futures were seen as the asset class with the most potential in APAC over the next three years, highlighting the evolving landscape of trading opportunities.

“Tremendous trading opportunities in the APAC region”

Will Mitting, founder and managing director at Acuiti, said: “APAC is the fastest growing region for listed derivatives trading volumes, and that is fueling interest in trading in the region among European proprietary trading firms and hedge funds. At the same time, many exchanges have invested in technology and processes designed to make it easier for international trading firms to connect and trade. This is creating a virtuous circle of growth that is set to continue.”

Keith Todd, CEO of Trading Technologies, said: “Trading Technologies has long recognized the tremendous trading opportunities in the APAC region. This study clearly demonstrates that these opportunities have only grown. European hedge funds and proprietary trading firms are among those poised to benefit as they learn more about how to navigate some country-specific challenges through education and the right partnerships.”

The findings from the “European Attitudes to Trading in APAC” report provide a comprehensive view of the evolving landscape of APAC markets. European trading firms are increasingly recognizing the potential for profits in this dynamic region, and with the right strategies, partnerships, and technology, they are poised to make a significant impact.

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