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European hedge funds and proprietary trading firms to up APAC derivatives trading

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European hedge funds and proprietary trading firms are set to expand trading across the Asia-Pacific (APAC) region as opportunities and volumes grow, according to the findings of a new new study by Acuiti and Trading Technologies.

European Attitudes to Trading in APAC, which was commissioned by Trading Technologies ahead of its inaugural TT Connect: Asia Insight event taking place this week in London, was based on a survey of senior executives at 53 European based proprietary trading firms and hedge funds.

The survey finds that while trading in APAC holds significant potential for firms, there are challenges unique to markets in the region that must be overcome in order to realise the rewards on offer.

Of those surveyed, 59% traded derivatives on markets in APAC with a further 11% set to start doing so. Some 37% of respondents who traded on markets in APAC said that trading in the region was more profitable than on markets in Europe, a view particularly pronounced among hedge funds.

Nevertheless, European firms face challenges to trading in APAC, with finding the right local partners and understanding local rules the top challenges cited by survey respondents. Another major challenge for proprietary trading firms was gaining access to regional derivatives markets via their preferred clearing firm.

Technology requirements were lower down the list of challenges. Over the past decade, third-party front office vendors have made substantial investments in expanding connectivity to exchanges in APAC, significantly reducing the cost of entry for their clients when it comes to engaging new markets.

The report also found that Japan is the most commonly traded market in the region, followed by Australia and Hong Kong, while Singapore was the easiest market to connect to, and China the hardest.

Firms trading Indian onshore markets reported the highest profitability from trading in APAC, while equity futures are seen as the asset class with the most potential in APAC over the next three years

“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,” said Will Mitting, founder and managing director at Acuiti. “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.”

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