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Hedge funds and prop trading firms eyeing new and emerging markets, says survey

Adoption of trading in emerging markets from hedge funds, proprietary trading firms and bank trading and execution desks is set to grow significantly as firms look to diversify trading strategies, seek unique opportunities and broaden exposures, a new study by Acuiti has found. 

Adoption of trading in emerging markets from hedge funds, proprietary trading firms and bank trading and execution desks is set to grow significantly as firms look to diversify trading strategies, seek unique opportunities and broaden exposures, a new study by Acuiti has found. 

Expanding Connectivity: Exploring the Challenges and Solution for Trading in New Markets, produced by Acuiti in association with BSO, reveals that more than half of the surveyed firms expressed definite plans to venture into a new market within the next three years. Additionally, one-third of the participants are actively considering expanding into new markets.

Hedge funds and proprietary trading firms, in particular, reported looking for new markets to trade in which they can deploy their strategies and expand operations. 

However, while secondary and tertiary markets have made significant advances over the past decade to improve the connectivity process for international trading firms, it is still an onerous process at many exchanges.

This is reflected in the time it takes to connect to a new market. Most survey respondents reported the timeframe for connecting to new markets once the decision has been made to connect as stretching to seven months or longer and that the timeframe for adoption was increasing. 

In addition, firms reported several challenges connecting to new markets. The cost of market data was the most significant barrier to entry for firms with connectivity costs, and preferred brokers providing access also being key barriers to entry. 

When it came to which regions firms were planning to trade, Asia and the Americas were the top choices selected by 76% and 67% of respondents, respectively. In Asia, Taifex, KRX and HKEx were the top markets firms were looking to start trading in, while in The Americas, firms reported interest in Brazil, Mexico and Chile. 

The report, based on a survey and a series of interviews of senior executives at 76 proprietary trading firms, hedge funds and bank execution and trading desks, also found that latency has become increasingly important for firms, even those that do not rely on speed for their strategies.
 

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