Proprietary trading firms have faced “challenging conditions” over the first half of 2023, thanks to a drop in volatility, rising costs and increased regulation, according to Acuiti’s latest quarterly Proprietary Trading Management Insight Report.
The report, drawn from senior proprietary trading executives, found that 61% of firms reported a worse performance in H1 2023 compared to H1 2022, with the relative lack of volatility a main factor. The percentage of respondents that cited lack of volatility as a significant or critical challenge rose from 4% last year to 51% this year. Nearly half, 49%, said their business performance in H1 2023 had been worse than an average year, with regulation cited as another headwind.
Ross Lancaster, head of research of Acuiti, said: “After an exceptionally volatile six months in the first half of last year, it is no surprise that proprietary trading performance has dipped during 2023.
“However, it is encouraging that sentiment is rising among managers of proprietary trading firms, which suggests that the second half of the year might bring a reversal in performance.”
The report also found that listed interest rates were the best performing asset class in H1 2023 while commodities, energy and FX struggled. Looking at different regions, strategies traded on exchanges in Asia were the best performing with those in the EU and UK the least profitable.
Regarding crypto, proprietary trading firms that are currently trading crypto remain bullish with 63% expanding their operations and none currently retrenching from the market. Additionally, two thirds of proprietary trading firms that do not trade crypto would at least consider doing so once regulatory frameworks have been established.
Despite the challenges in H1 2023, sentiment was shown to be improving in this quarter, reaching 58. This is still low by recent standards, Acuiti said, but is better than the last quarter which saw sentiment drop to an 18-month low of 41.
Aleksey Larichev, co-founder and managing director of Avelacom, said: “In times of subdued volatility, proprietary trading firms are looking for ways to trade profitably. It is also encouraging to see the continued interest in the opportunities present in the crypto markets.”
©Markets Media Europe 2023
