Prop traders winning big on interest rates and commodities, finds new research

Listed interest rate derivatives and commodities futures and options performed best for proprietary trading firms in the first half of 2022, according to a new report by Acuiti. 

As fears of a recession and soaring inflation cause volatility across global markets, a Q2 proprietary trading insight report from Acuiti (conducted in partnership with low latency provider Avelacom) has found that over half of firms report both listed interest rates and commodities to be their top performers, The TRADE can exclusively reveal. 

The report, which is based upon a quarterly survey of the Acuiti Proprietary Trading Expert Network, a group of over 100 senior proprietary trading executives from across the globe, found that 58% of firms reported commodities trading to be either exceptionally or very profitable, while over half of respondents said the same for listed interest rates.  

Crypto currency trading also performed well, with over half of firms confirming strong profitability in that asset class. The recent falls in crypto prices have not deterred traditional proprietary trading firms from entering the market. Overall, 22% of respondents said that they had accelerated plans to enter the market as a result of the volatility. 13% had increased trading and just 3% had exited the market.  

It appears that the sustained volatility that has characterised 2022 has benefitted proprietary trading firms, with 76% of Acuiti’s Proprietary Trading Expert Network reporting a better than average six months.  

“Volatility has remained elevated during the first six months of 2022 and this has increased the requirement for firms to hedge and reposition,” said Will Mitting, founder of Acuiti. “Proprietary trading firms provide liquidity to listed markets and their role is particularly important during times of market stress.”  

Notably, in-house technology is also advancing, with significant levels of development being recorded across a range of functions.   

Respondents also gave their views on how well third-party vendors served the proprietary trading market and found strong demand for more specialist risk management software that reflected the complexities of proprietary trading.  

“Ultra-low latency firms have the most unique requirements towards technology set ups. That creates opportunities for third-party vendors that can provide services to these types of firms and cover their needs,” said Aleksey Larichev, CEO of Avelacom.