EU Prop Firms Regulatory Burden Three Time Higher than US: Survey
Posted by Colin Lambert. Last updated: March 28, 2024
Management at proprietary trading firms operating in the European Union faces a regulatory burden three times that of their US brethren according to a new survey.
The survey, based upon a survey of executives at 100 global prop trading firms in the Acuiti Proprietary Trading Network, found that almost half of EU-based proprietary trading firms spend between 26% and 50% of their time on regulations compared to none in the US. In the US, 70% of respondents said that they typically spend 1-10% of their time on regulations with the remainder spending 11-25%.
The finding will not come as a surprise to regulation-watchers, the EU regime remains highly fragmented, with national nuances across the single economic zone. Equally, the US regulatory regime, while evolving, is more established for firms operating there.
“We have covered before the increasing regulatory burden on proprietary trading firms in the EU when it came to the proposed implementation of IFD/R,” says Will Mitting, founder of Acuiti. “This quarter’s report highlights the extent of the challenges facing firms.
“One major issue for both firms in the EU and the UK is that new rules coming into force are typically automatically applied to Mifid II registered firms,” he continues. “So while the initial regulation contained within Mifid II was appropriate, the level of increased rules over the past decade is creating significant pressures on firms.”
The report also finds that prop firms typically reported an average year in 2023, although, firms based in the UK experienced the best performance. Sentiment is strong for 2024 after a good start to the year globally for prop firms, it adds.
Acuiti says 68% of respondents said they planned to trade new exchanges in 2024, with many citing APAC, especially onshore India, as a region for expansion. Brazil also a popular target for growth. On the downside, headcount increases has led to an increase in costs, and fees are set to rise as the Basel III rules hit clearing brokers.
