Trading firms are increasingly looking to diversify their trading strategies through entry to new markets, with over half of respondents confirming definite plans to expand to new regions within the next three years, a new Acuiti report has found.
Of those, around are 76% looking to expand to Asia – with Taiwan specifically top of the priority list, while 67% expressed that South America is a region of focus. Both Brazil and Mexico were the most desirable targets for firms, with Chile, Colombia and Argentina were also highlighted.
Those looking to expand are doing so to diversify their trading strategies, Acuiti’s report has found, with 69% of those surveyed listing this as the key driver for the moves. Other core drivers included finding unique opportunities in a new market and a desire to broaden exposures.
New markets are however increasingly sticky, with almost 90% of respondents to the survey saying they were not planning to remove any of the markets they currently trade.
Connectivity costs ranked top out of five key considerations when connecting to a new market for proprietary trading firms, while hedge funds and bank execution desks ranked it second after preferred brokers providing access.
Hedge funds and proprietary trading firms are most interested in looking to new markets for their operations and deployment of their strategies, according to the report.
Most survey respondents reported timeframes exceeding seven months when entering new markets once the decision had been made – with that time continually increasing. Acuiti’sreport highlighted “customs efficiency of the target market, domestic tax regimes and even geopolitics” as the main causes for delay.
Ross Lancaster, head of research at Acuiti, said: “The decades long trend towards globalisation of trading strategies is accelerating as the infrastructure and technology of emerging market venues improve at the same time as firms look to expand their strategies beyond their traditional markets.”
Lancaster explained that survey responses demonstrate that the time it takes to connect to new markets – sometimes over a year – is one of the main drivers for firms choosing to work with third party providers.
Acuiti surveyed 76 proprietary trading firms, trading desks, hedge funds and bank execution desks.