FX Markets Brace for Influx of Proprietary Trading Firms in 2024

<p>In a
proactive move signaling confidence in the financial markets, proprietary
trading firms globally are poised to scale up their foreign exchange (FX)
trading activities and boost investment budgets in 2024. This development stems
from findings in the latest Acuiti Proprietary Trading Management Insight
Report, unveiled today (Monday).</p><p>Proprietary Trading Firms
Gear Up for FX Growth and Investment Spike in 2024</p><p>The report,
a collaborative effort with Avelacom and produced after surveying senior
executives from over a hundred <a href="https://www.financemagnates.com/tag/prop-trading/" target="_blank" rel="follow">proprietary trading firms</a>, paints a picture of a
sector on the brink of significant growth. </p><p>With 45% of
FX trading entities looking to substantially up their game in the asset class,
and a keen interest in equity options, the landscape for 2024 shows a bullish
trend. Conversely, cash <a href="https://www.financemagnates.com/terms/e/equities/">equities</a> seem to be on a downtrend, especially in
Europe, where a notable fraction of firms intend to pare down their exposure.</p><p>"The
report reveals that proprietary trading firms are willing to invest in
improving their connectivity to markets, including exploring new ones," Aleksey
Larichev, the Managing Director at Avelacom, commented.</p><p>Further
diversification is evident as several firms set sights on the cash government
bond markets, indicating a strategic move to broaden their trading spectrum. A considerable
63% of these firms are ready to allocate above-average resources toward
advancements in algorithmic trading, market access, and data acquisition.</p><p><a href="https://www.financemagnates.com/forex/traders-want-to-catch-the-volatility-wave-in-trading-study-finds/" target="_blank" rel="follow">Acuiti's July research pointed out</a> that traders and proprietary trading firms aim to ride the waves of volatility precisely in the
most volatile markets where the highest activity is observed.</p><p>"This
shows their plans to expand and optimize their current trading setups. It's a
positive sign that the market is in good shape and working to stay competitive,"
Larichev added.</p><p>One of
Acuiti's earlier reports suggested that trading firms <a href="https://www.financemagnates.com/institutional-forex/trading-firms-eye-asia-for-new-markets-count-on-third-party-providers/" target="_blank" rel="follow">are increasingly looking
towards Asia</a> in search of new markets. </p><p>Rising Fees and Future
Regulatory Changes</p><p>Yet, it's
not all smooth sailing. The report underscores the strain of rising exchange
fees which are constricting the range of markets and products firms are willing
to trade. For many proprietary trading companies, these costs represent a
significant and increasing burden.</p><p>Nine out of
ten survey participants have reported a rise in <a href="https://www.financemagnates.com/terms/e/exchange/">exchange</a> fees over the past
five years, with nearly all of those not facing higher fees being primarily or
exclusively involved in cryptocurrency trading.</p><p>"Exchange
costs are an increasing burden for many firms, which are trading fewer products
and markets than they would if fees were lower," said Will Mitting, the
Founder of Acuiti.</p><p>Adding to
the complexity is the low awareness of the EU's impending Digital Operational
Resilience Act, set to take effect in 2025, which could have significant
compliance implications for the firms.</p><p>Amidst
these challenges, the report captures a sector in dynamic flux, with over half
of the firms trading equity options contemplating 0 Days to Expiration (0DTE)
strategies on Eurex, signaling a potential uptick in the product's trade volume
come 2024. 0DTE refers to options contracts that expire on the same day they
are traded.</p><p>In its
report from the end of October, Acuiti also indicated that there is <a href="https://www.financemagnates.com/institutional-forex/hedge-funds-sound-alarm-on-fx-prime-brokerage-market-changes/" target="_blank" rel="follow">a noticeable consolidation trend</a> in the FX prime brokerage industry, especially in hedge funds. The study highlighted the
growing concerns among fund managers about adverse changes occurring in the
sector. </p>

This article was written by Damian Chmiel at www.financemagnates.com.