Proprietary (Prop) trading firms are optimistic about 2025, according to the latest Acuiti Proprietary Trading Management Insight Report. The report, released today (Monday) in partnership with Avelacom, surveyed 120 senior proprietary trading executives from 103 firms across the global market.

Market Volatility Drives Optimism

The report reveals that 64% of senior executives expect above-average conditions in 2025. Of these, 21% predict a well above-average year, while 43% expect it to be slightly above average. Only 3% foresee a worse-than-average year.

This optimism is driven by expectations of increased market volatility, favorable conditions, expanded offerings, and improved technology infrastructure.

This quarter, a member of the Proprietary Trading Expert Network asked for feedback on recent volatility patterns. It was noted that market moves are faster and shorter-lived, making profits harder to capture. Over a third of the network agreed, with 50% of ultra-low latency firms sharing this view, compared to 37% of algorithmic firms and 29% of hybrid firms.

Investment Plans Reflect Growing Confidence

However, there are notable differences between firms. For example, 47% of ultra-low latency firms predict a well above-average year, compared to just 10% of firms using manual or hybrid strategies. Additionally, 19% of firms that are predominantly algorithmic but not ultra-low latency share this positive outlook.

“Looking ahead to 2025, ultra-low latency firms are more optimistic about their performance, with most expecting better results. Many are investing heavily in improving latency across existing markets, colocation infrastructure, and connectivity to new markets, as the report shows,” said Aleksey Larichev, CEO of Avelacom.

Investment plans for 2025 reflect this optimism, with 65% of firms indicating their budgets will be above average. Among ultra-low latency firms, 54% plan to significantly increase their investment, more than double the average rate. These investments will focus on improving latency, market data, algorithmic trading tools, and colocation infrastructure.

“These findings point to a growing divide between the top tier 1 trading firms and the tier 2 and 3 and less latency focused firms,” said Ross Lancaster, Head of Research at Acuiti. “As the top firms invest more in technology, there is a risk that their dominance of the market will continue to grow, further leaving behind smaller firms.”

EU IFR/IFD Rules Raise Concerns

Proprietary trading firms continue to face challenges with the EU’s IFR/IFD rules, citing their complexity and the added costs to business models. Governance and remuneration rules, particularly for non-EU operations, are a major concern, as they may hinder firms' ability to compete for talent and transfer skills into the EU.

While some advocate for a complete overhaul, the majority favor a targeted revision to address these issues. Over 60% see the rules as a significant competitive disadvantage, particularly against US peers.

Diversity Issues Hinder European Growth

Key findings from the report also include a planned increase in exposure to equity options and FX in 2025. Additionally, 71% of US-based firms anticipate market consolidation within the next 12 months. In Europe, a lack of diversity in customer flow is seen as the main barrier to growth in the equity options market.