Derivatives Market Sentiment Drops for Second Successive Quarter

Business confidence across the derivatives industry declined for the second consecutive quarter, according to the latest SGX Global Market Sentiment Index, published by SGX Group and Acuiti.

The Index is a quarterly benchmark of business confidence across the derivatives industry, based on a survey by Acuiti – in Q3 2025 the index fell to 68, down from 74 in Q2. This reflects, the survey says, expectations of slower revenue growth from market participants amid falling volumes, reduced volatility and ongoing geopolitical uncertainty. 

This marks the second consecutive quarterly fall in optimism following a record high of 78 in Q1 2025. In Q3 2024 the Index was at 68, in the same quarter in 2023 it was at 64. Regionally, confidence fell across Europe, North America and APAC with the sharpest falls in US – albeit from an elevated high during Q1 and Q2. In that region the confidence index fell from 89 to 70.

Sentiment among proprietary trading firms recorded the sharpest decline, falling from 81 in Q2 to 63 this quarter. Firms reported that events which earlier in the year triggered sharp market moves are now having a diminished impact, resulting in fewer trading opportunities. US prop trading firms in particular were gloomier, just 45% were optimistic, compared to 92% the previous quarter.

Hedge funds were the only segment to report improved sentiment, rebounding from a Q2 low of 61 to 68 in Q3, although this is largely in line with the longer term reading of just over 67. The recovery from April’s market volatility and growing optimism among CTAs contributed to the uplift, however, concerns remain around unpredictability and macroeconomic risk.

“While the first half of 2025 was a profitable period for many firms, the industry is entering a more cautious phase,” says Will Mitting, managing director of Acuiti. “Market participants are adjusting to more muted responses to macro events and lower volatility across major asset classes. While there is still plenty of opportunity to be had across global derivatives markets, both volumes and volatility have fallen back since their record highs in April.” 

EM FX

The latest report also takes a look at emerging market FX, finding that 67% of respondent find limited sources of liquidity (due to fragmentation) the biggest challenge in EM FX. The lack of real-time data is cited by 26%, the report observes that “Tier 1 bankers were most likely to report that a lack of real time data was a challenge for them”, which is a little surprising given these firms are generally the best connected in the market and have significant market data infrastructure.

In terms of the EM currencies respondents saw the best opportunity for profit in, the Indian rupee came out on top at 38% (not, presumably, using strategies that may break the rules). Brazil’s real came next at 31% while 25% saw opportunity in the managed market that is the renminbi.

As far as the top considerations for respondents when trading FX, unsurprisingly best price came top, followed by ease of access and ability to execute in size (one presumes this is relative to the individual markets), and firm liquidity.