Asia is driving demand for extended hours trading, according to new study

Asset managers and hedge funds in Asia are reporting the strongest demand, marking their growing global influence, according to a joint study.

A new report from Acuiti has found that there is strong and increasing demand from respondents to trade on markets based outside their time zones during their local trading hours – with Asia showing the fastest growing interest.

The study was commissioned by Montréal Exchange Inc (MX), the derivatives arm of TMX Group, and surveyed over 100 senior executives from proprietary trading firms, hedge funds, asset managers and the sell-side about demand and trends in trading in extended hours sessions.

The trend is, unsurprisingly, being driven by firms already trading in extended sessions on international exchanges, with 96% of respondents reporting some or significant interest in trading during extended hours trading sessions.

The remaining 4%, which reported no demand, were international banks with global desks that traded during local hours.

However, even firms that are not currently trading in extended hours sessions are increasingly thinking about doing so, with over half (54%) reporting demand.

Overall, the study found that demand is strongest in Asia, where 44% of respondents already trade extended hours and a quarter (26%) of those that don’t are keen to look into it. The highest demand for extended hours was reported by asset managers and hedge funds, which Acuiti believes represents the increasing global reach of this market segment.

“As we continue to push the evolution of our markets and address the increasing global demand for Canadian derivatives, launching extended hours in Asia was the next phase of MX’s globalization strategy,” explained Luc Fortin, president and chief executive of MX and global head of trading at TMX Group.

“As we move forward, extended trading hours better aligns MX with our global peers, increases international visibility and connects us to more clients.”

However, the reasons for wanting extended trading hours can vary, found Acuiti, with asset managers wanting the ability to better hedge exposures, while hedge funds and proprietary trading firms are more interested in optimising their strategies.

For firms already trading extended hours, key drivers of demand include capturing specific opportunities, requirements for trading strategies, the ability to react to events throughout the day and hedging considerations.

For firms that are not yet trading extended hours, the strongest priority is to capture specific opportunities related to extended trading hours.

“The world is becoming smaller in terms of firms’ ability to trade globally and the launch of extended hours trading sessions is a key development in facilitating that trend,” said Will Mitting, founder and managing director at Acuiti.

“The appetite from firms based in Asia to increase the scope of their trading activities is striking and reflects the ever-increasing sophistication and ambition of firms across the continent.”