Buysiders Expected to Trade More Futures in Next 12 Months

With the derivatives market working its way through a bevy of new regulations, bonds providing limited upside and equities looking like they’ve peaked for the year, buysiders are eyeing up the futures market as the next best place to trade.

In fact, as many as 70 percent of buyside investors said they expect their futures trading volumes to increase during the next 12 months, according to new research from market consultancy Tabb Group. Institutional investors added that the futurization of swaps will also gain acceptance in 2015 as expected increases in volatility positively affects the market.

Tabb Group conducted this research in its “Futures Industry Poll: The BuySide Assessment” survey in September 2014 that included more than 40 traditional asset managers (long only, mutual funds, pension funds and insurance companies), hedge funds, commodity trading advisors (CTAs) and proprietary trading firms on recent trends impacting futures exchanges and futures commission merchants (FCMs).

Furthermore, 82 percent surveyed said that futures trading growth will be driven by increased market volatility and rising interest rates. According to Tabb principal Matt Simon, head of futures research, and research analyst Luther Zhao, co-authors of the poll, the impact of Federal Reserve policy will result in increased interest rate futures volumes with the potential to change underlying cash bond market participation.

“These buyside firms also see expanding their use of futures in equity-related products and expect to increase their activity in equity options by as much as 89% and ETFs by 65%,” Simon said.

The 14-page, 21-exhibit report is available for download by Tabb Group Research Alliance Derivatives.