FX Among the Struggles for Prop Traders – Survey

Proprietary trading firms report challenging conditions in the first half of 2023, with FX (along with commodities and energy) struggling, and listed interest rates best performing among asset classes.

The relative lack of volatility was cited as the main factor behind the dip in opportunities, according to the latest quarterly Insight Report from Acuiti, produced in association with Avelacom, with 51% of respondents citing it as a significant or critical challenges, up from 47% in the same period in 2022. The report also reveals that 61% of firms reported a worse performance than in H1 2022 and 49% said that their business performance in H1 2023 had been worse than an average year.

It was not all gloomy news, however, for the report also finds sentiment is improving. Last quarter, the Acuiti Proprietary Trading Sentiment Index reached an 18-month low of 41. This quarter saw an increase to 58 – still low by recent standards but a significant improvement from the previous month.

Strategies traded on exchanges in Asia were the best performing with those in the EU and UK the least profitable, and there is still some bullishness in crypto, with 63% expanding their operations and none currently retrenching from the market. Equally, the report finds that two-thirds of proprietary trading firms that do not trade crypto would at least consider doing so once regulatory frameworks have been established

“After an exceptionally volatile six months in the first half of last year, it is no surprise that proprietary trading performance has dipped during 2023,” says Ross Lancaster, head of research at Acuiti. “However, it is encouraging that sentiment is rising among managers of proprietary trading firms, which suggests that the second half of the year might bring a reversal in performance.”