European hedge funds and proprietary trading firms boost derivatives trading in APAC


APAC stands for “Asia-Pacific” and is used to define the further east region of Asian continent on Pacific Ocean and Oceania. From an economic point of view, the APAC is one of the fastest-growing globally market capable of creating significant opportunities for European firms, even though this area of the world has not always had a “good reputation”, due to the fragmented payment landscape, the disjointed behaviour of the purchasers, and the restrictions imposed by local legislation.

Nonetheless, over the past two decades, the APAC region has experienced a strong growth, and it played an increasingly important role in the world economy: the weight of APAC in global GDP has risen from around 27% in 2000 to around 37% in 2021, as reported by S&P Global.

In this article we will explore the growth of the APAC market, examining its economic ascent and the changing business landscape, in order to understand why many European hedge funds and trading firms are increasingly considering investments in these countries.

A rebalancing of the global economy, why is APAC so attractive?

The fast economic growth in recent years in the Asia-Pacific (APAC) region has involved all business sectors, including the financial one. In fact, it has created significant opportunities for European proprietary trading firms and hedge funds.

At first, these firms have looked towards the biggest financial centres of Japan, Hong Kong, Australia and Singapore, but, nowadays, also smaller markets are attracting international investors.

Simple statistics reinforce the thesis that this region is experiencing significant growth. Indeed, according to FIA data, the volumes of derivatives, traded in APAC, are up 82% in the year 2023 to the end of July, compared to a decline of 7% in Europe. This change of focus is mainly due to a reduced complexity of connection between the major markets and the emerging markets. The shift of economic power towards the APAC region has wide-ranging implications for the global economy. It has led to changes in trade patterns, with increased South-South trade (trade between developing countries) and a growing reliance on APAC markets for global businesses.

The increased international interest in the APAC market has led APAC countries to change the financial landscape to facilitate and attract international investments. The signing of the free trade agreement between the 10 ASEAN and 5 other countries in November 2020, is an attempt to reduce entry barriers and attract international capital.

This evolved framework has led trading in APAC to gain significant potential for firms, whose managers claim that the region is more profitable than European markets. However, there remain substantial challenges that need to be addressed to favour investments in these areas.

Regulatory complexities: currency trading and its impact on APAC markets

Prior knowledge and analysis of APAC markets from social, political, and economic perspectives, provide important information in order to determine the extent of investment in time and resources needed to address potential barriers to entry.

Here’s an overview of the main challenges that foreign companies may have to face in APAC market.

  • Domestic political instability causes slowdowns on both the government and investor sides and has a negative effect on confidence, particularly China and India where regulations are subject to sudden changes.
  • Many jurisdictions mandate that access is provided by onshore brokers.
  • Time and language differences can cause delays.
  • Currency conversion.
  • In markets where the value chains are considered enhanced if formed by local large groups, foreign companies will have difficulty in finding an access channel and becoming competitive.

The internal trade between the 10 ASEAN countries will be gradually consolidated, reducing obstacles to the mobility of goods, services, people and capital. The production localization in one of these countries allows the exports with low or zero duties in the other members of APAC region and can constitute a base to operate also outside of the block.

In some cases, this is compounded by the lack of insider status and by low presence of consumers (despite the high per-capita income) and the market’s limited size, that makes these markets crowded. Over crowding is a challenge highly relevant to many sectors, such as banking, insurance, logistics and shipping.

Moreover, some Asia-Pacific economies have less financial regulation than economies in the West, and therefore business practice uncertainty and legal compliance risks for foreign companies are more likely to occur. For instance, no single regulator of Asia-Pacific region currency trading: Asian nations can maintain low rates of exchange in order to promote exports at expense of Western economies that, once entered in APAC market, must work within complex regulatory environments, which may create further challenges to growth and profitability.

Finally, another major challenge for proprietary trading firms is gaining access to markets from their preferred clearing firm. This is much less of an issue for hedge funds, which are typically offered market access as part of prime brokerage engagements with the largest banks, with extensive memberships in APAC. For proprietary trading firms, though, many are required to work with local clearing firms to access secondary and third tier markets across APAC.


In conclusion, we can state that the current remarkable growth in the Asia-Pacific financial markets is certain to continue and these markets are expected to play a further important role in the world capital markets for investment and risk management. By 2040, the economic weight of the APAC region is forecasted to rise further to around 42% of world GDP, consequent to the economic expansion of China, India and the Southeast Asian countries.

As the global economy continues its shift to a bi-modal world in which China and the US for dominate, the opportunities in trading across APAC will only grow. Expectations of growth in fixed income are heavily centred on Japan. In China, the key opportunity for many firms lies in its commodity markets.

The Acuiti report shows a ranking of the derivatives based on their potential of growth: the highest potential of continued growth is held by equity futures, followed by equity options, commodities, fixed income and lastly the FX.

This report finds that, while there are challenges unique to markets in APAC, there are unique opportunities as well. And firms that invest now in overcoming the challenges can succeed.

Join ThePlatform to have full access to all analysis and content:


You may also like...

Hedge Fund Trends

The hedge fund sector remains dynamic, adapting continuously to market shifts and investor demands. Lately, there's been a discernible trend towards diversification in investment strategies. Hedge funds are progressively delving into alternative assets and novel methodologies, moving beyond conventional markets.…...

Hedge Fund Trends

The hedge fund industry is characterized by its dynamic nature, constantly evolving in response to market trends and investor preferences. In recent times, there has been a notable diversification of investment strategies, with hedge funds increasingly exploring alternative assets and…...