The derivatives trading industry looks to invest ahead of what is expected to be a busy 2025 amid rising sentiment across the global derivatives market in Q4 2024, according to a report commissioned by SGX and conducted by Acuiti.
The SGX Global Market Sentiment Index was based on a quarterly poll of Acuiti’s Expert Networks, comprising senior, derivatives-focused executives from hedge funds, asset managers, proprietary trading firms, and the sell-side.
The report critically examines investment strategies within the derivatives trading industry, from hedge funds to prop firms, to sell-side and clearing firms, highlighting where firms plan to allocate their capital.
Sentiment Index rose to 72 from 68 in Q3 2024
Acting as a barometer of sentiment from across the global derivatives market, the Sentiment Index rose to 72 from 68 in Q3 2024 driven by growing optimism among hedge funds, asset managers, and sell-side execution desks.
On the flip side, sentiment among senior executives overseeing sell-side derivatives clearing businesses and senior proprietary trading executives declined slightly in the previous quarter.
The report also looks at investment budgets for 2025 and found that all company types included in the survey, with the exception of asset managers, are planning above-average investments in 2025. The list is led by proprietary trading firms, which were the most likely to have significantly higher investment budgets and were targeting investment in improving latency, market data, and algorithmic trading.
According to the study, sell-side clearing firms were also planning big technology investments. Repo clearing functionality is the most common area of investment being planned ahead of the introduction of the SEC’s mandate to clear repo and Treasuries from the end of 2025.
As to hedge funds, the investment will be targeting market data, connectivity to new exchanges, and risk management, while sell-side execution desks look to boost risk management, algo offerings, and investing in trading screens.
Full impact of the US election in the Q1 2025 Index report
Will Mitting, founder of Acuiti, said: “Q4 2024 saw a meaningful increase in sentiment across the derivatives market. This was driven in part by volatility in the run up to the US election but also by strengthening confidence in Asia as the market recovered.
“Data for this quarter’s report was collected between 23 September and 15 November, meaning that the results of the US election were only reflected in small sample of the data. However, we did see an uptick in sentiment after the election as fears over a disputed election did not come to bear. We will see the full impact of the market’s response to the results of the US election in the Q1 2025 Index report.”
Pol de Win, Head of Global Sales & Origination at SGX Group, said: “Derivatives volumes hit record highs last year as global investors managed risk more efficiently in volatile markets. In 2025, investors will chase higher returns, seeking innovative investments and ways to optimise their portfolios.”
