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Interest Rate Derivatives To Boost Proprietary Trading Firms Profits

Executives from top proprietary trading firms have predicted interest rate derivatives as the most lucrative product. The latest report from Acuiti includes insights from the 100 top executives from global proprietary trading firms. The report was produced in partnership with Avelacom and compiles very handy information.

Apart from interest rate derivatives, the executives also believe that equity options trading will see a rebound. Last year investor interest in Equity options remained lower than expected. However, the leaders from prop firms are anticipating an increased demand in 2023.

“Proprietary trading firms the majority of Avelacom’s client base and it is heartening to see our clients reporting that they have had a strong year… In 2022 we extended our presence in the Middle East, Asia Pacific, and Latin America to provide more opportunities in most asset classes, including cryptocurrency.”

Aleksey Larichev – CEO Avelacom

Acuity Proprietary Trading Insight Report

Acuity, in partnership with Avelacom, has released the proprietary trading insights report. Avelacom provides low-latency connectivity and IT solutions to market makers leveraging its high-speed infrastructure. The survey was conducted with 100 top executive members of the Acuity Proprietary Trading Expert Network.

The following are the major findings of the report:

  • The majority of participants agreed that 2022 was a very good year for Prop firms.
  • The hike in market data fees in 2022 increased the cost bases of most trading firms.
  • Conventional proprietary trading companies opt for default insurance while trading cryptocurrencies. This is done in order to avoid an FTX-like scenario.
  • The market has generally had a positive view of passive liquidity schemes, including speed bumps.

Since the fall of 2021, US Federal Reserve has been driving the markets. The correlation between liquidity dynamics and rate hikes has never been more evident. Goldman Sachs analysts are expecting another 3 rate hikes in 2023, which mean more speculation in the coming months. The prevailing uncertainty on interest rates has made them one of the most traded speculative assets.

According to the report, energy, equity options, and commodities are seen as having potential, and nearly half of the survey respondents identified opportunities in crypto-currencies, despite market turbulence in 2022.