Posted by Colin Lambert. Last updated: March 20, 2025
Confidence among global derivatives market participants soared in the first quarter of the year as the second Trump presidency brought back volatility with a bang due to efforts to roll back regulation and the impact of tariffs on global trade.
The SGX Global Market Sentiment Index Report, produced by Acuiti, a quarterly benchmark of business sentiment across the global derivatives market, shows an increase in positive sentiment across all but one of the participant cohorts, asset managers, as it climbed to 78%, up from 69% in the same quarter a year ago.
The rise in optimism was driven by senior executives expecting positive trading conditions and soaring volumes on major exchanges, which has pushed the index higher due to record positivity from sell-side actors on both the execution and clearing sides. The uptick in volatility has also brought good news for prop trading firms and hedge funds, but it left asset managers downbeat. As the Trump administration ploughs ahead with a deregulation drive, larger firms are expecting to reap the biggest benefits.
“The start of the new presidential term in the US was the main reason behind the increasing sentiment as firms look ahead to higher-for- longer interest rates and market volatility,” the report states. “Considering the actions of the new US administration in its first weeks in office, the market is expecting significant volatility across multiple asset classes over the next four years.”
High confidence from the sell-side is down to their services being focused on agency-type arrangements which tend to do well in volatile markets due to clients trading more often. Among hedge funds, systematic players were most confident with CTAs looking to benefit from uncertainty as investors look to this sector for uncorrelated returns amid roiling global markets.
Hedge funds in Asia were significantly less optimistic than their peers in Europe and the US, however. Several hedge funds cited anticipated short-term volatility emanating from the new US administration as a key reason for their optimism. Others pointed to increased volumes coming into derivatives markets as investors look to hedge funds to navigate uncertain global markets and provide uncorrelated returns.
Tier 1 and tier 2 banks are the most optimistic about the future among the sell-side execution cohort, due to expectations of deregulation and lower capital requirements under the new US administration, which will disproportionately benefit larger banks. The same picture emerged from a clearing perspective, where business confidence leapt to a record high driven by expectations of higher rates in the US, increased volatility and deregulation. Of this group, multi-national banks and international nonbank FCMs are significantly more confident than regional peers and smaller brokers.
“This provides further indications that current market conditions and the geopolitical environment are likely to benefit larger firms in the market,” the report says. “Overall, these are good times for the global derivatives markets – uncertainty creates opportunities and the need to hedge. At the same time, volatility continues to be an ever-present feature of global markets as the world adjusts to the new administration and its policies.”
