By Tony Shaw, Executive Director, London Office and Head Sales UK & Ireland at the Swiss Stock Exchange.
One of the clearest findings from our research was the continued enthusiasm for digital assets.
Two thirds of those polled identified growing interest in these assets from their own clients, and traders are becoming increasingly bullish about their potential, as well as the potential of crypto-products, with 80% predicting that demand will increase in the long term. Market users believe digital assets will generate cost synergies and efficiencies by streamlining trading and settlement, ultimately reducing overall trading costs.
In 2019, we saw significantly higher trading volumes involving products with crypto currencies as underlyings. While overall volumes grew by +8.5% over 2018, the increase in crypto-products was +17%, reaching CHF 518.2 million ($534.54 m). Furthermore, there was a +21% year-on-year increase in the number of transactions, with 19,636 trades in total.
There’s no doubt that digital assets are attracting interest. We’ve fully recognised this, and the potential they hold, with the building of the SIX Digital Exchange (SDX), a fully integrated issuance, trading, settlement and custody infrastructure for digital assets.
Beyond these products, most traders expect artificial intelligence (AI) to bring a multitude of benefits to market operations.
Two thirds of survey respondents believe AI will create more opportunities for traditional equities, while another two thirds expect automation to reduce the cost of trading. Innovation in this space is, and will continue to be, a key driver in futureproofing the industry to withstand risks and challenges from within and beyond the market.
Beyond technology, there is growing support behind calls for shorter trading hours being led by industry groups like the Investment Association (IA).
The IA is advocating for trading hours to be cut from 8.5 to 6.5 hours a day, in order to make the industry more flexible and accessible to women and working parents. Given the speed at which technology like AI is evolving, our survey found that overall, traders were largely supportive of the move to shorter hours – so much so that many claimed reduced hours could also bring operational benefits: 36% of traders said the introduction of shorter trading hours would prompt greater market liquidity.
Beyond markets, geopolitics continue to drive and shape sentiment.
It was not surprising that 80% of traders’ strategies were influenced by Donald Trump’s tweets in 2019. In fact, three quarters of traders believe the US election will impact trading activity in 2020, while 65% acknowledged that potential trade wars would also have an impact. Notably, only 39% of those surveyed identified Brexit as a factor that would influence trading behaviours. Traders appear to be bearish about the state of the global economy overall, as 58% brace themselves for a global recession. Some continue to hold out hope, however, as 42% of respondents predict macro conditions will be fairly stable over the next three years.
When we consider each of these factors together, what we get is an understanding that, while markets themselves are evolving alongside technology, politics and global economic stability will continue to challenge traders in 2020.