As prediction markets continue to garner significant traction across everything from sports to politics, the concept is now entering the radar of institutional trading. Natasha Cocksedge explores the up-and-coming sector to question whether it is truly about ‘buying into the future’ and where the line between trading and gambling is drawn.
Demand from institutional clients and clearer regulatory frameworks cited as key drivers of changing sentiment, finds a recent report.
Less than a third of quantitative trading firms believe their front-office infrastructure can handle the volumes expected by the end of the decade, according to Acuiti’s latest report.
“Moving from tradfi to crypto is not a plug and play but requires an understanding of the nuances of the market,” Acuiti’s founder and managing director tells The TRADE; two thirds of respondents to Acuiti’s survey reported that building connectivity to crypto venues was ‘challenging’ while 34% found no difference to traditional markets.
Prediction markets have traditionally been largely driven by retail demand, however findings in Acuiti’s recent report point towards a growth in institutional interest, with planned adoption from these firms highest in the US.
European asset managers endorse more clarity around guidelines and greater restrictions when it comes to the use of pre-hedging, according to Acuiti’s latest report.
According to Acuiti and FIS’ recent study, the upcoming SEC’s US Treasury clearing mandate is a key driver behind a growing industry interest in self-clearing.
Although firms recognise the benefits of extending trading hours, proprietary traders are more aligned on the challenges posed, such as operational staffing and resource requirements, according to an Acuiti and Avelacom report.
An increased focus on risk management and trading strategies in the past decade are key to the firms’ strong performance, according to a report by Acuiti and Avelacom.
More than half of those surveyed in the latest Acuiti sell-side execution management insight report believe that the derivatives industry has experienced either a ‘significant’ or ‘moderate’ loss of expertise in the last 10 years.