While fallout from Trump’s ‘Liberation Day’ tariffs in April and the market volatility which ensued caused industry chaos for some, proprietary trading firms prospered, new research by Acuiti and Avelacom has found.
According to the report, only 7% of proprietary trading firms experienced losses during the periods of volatility.
These figures indicate that investments made by proprietary firms into risk management and trading strategies over the last 10 years have proved successful.
The report also pointed towards factors alongside market volatility, such as an increased interest in AI and similar technological investments, in driving a competitive advantage throughout the year.
Ross Lancaster, head of research at Acuiti said: “Proprietary trading firms perform a vital role to the market during times of volatility providing liquidity in times of market stress.”
“The volatility during early April put significant strain on the market but proprietary trading firms proved the value they add and performed well as a result.”
Moreover, 65% of proprietary trading firms are expected to grow their headcount by hiring traders, software developers, network engineers and risk management positions, despite few reports of salary increases for the majority of roles over the past year.
Read more – Market volatility driving derivatives growth
“We are seeing a variety of requirements from proprietary firms,” said Aleksey Larichev, chief executive of Avelacom.
“While most continue to invest in low-latency strategies and the need to be the fastest, others are exploring alternative approaches, like risk-focused.”
Despite the emphasis on risk management solutions, the report also found that only 19% of proprietary firms believe that pre-hedging during client order flow execution should be permitted.
Additionally, the general consensus of those surveyed emphasised that improved market maker schemes and a revision of capital requirements would make the biggest difference to increasing European market liquidity.