Exodus of European Proprietary Trading Firms Set to Accelerate Due to Regulatory Burdens

The number of European proprietary trading firms relocating outside the continent is set to accelerate in the wake of unsustainable regulatory burdens, the latest Acuiti Proprietary Trading Management Insight Report has found.

The quarterly report, which was released today and is produced in partnership with Avelacom, is based on a survey of the Acuiti Proprietary Trading Expert Network, which comprises senior proprietary trading executives around the world. The report provides insights into the key trends facing the community.

This quarter’s report found that 12% of European proprietary trading firms had decided to move outside the region and a further 36% were considering doing so. They will join the 8% that had already moved. Of those that had decided to move, Dubai is the main location to where firms were looking to relocate, followed by Singapore.

The decisions to relocate follow a substantial increase in regulatory burdens, with the Digital Operation Resilience Act (DORA), the final straw for many firms. All Mifid II regulated firms are now subject to DORA, which requires firms to put into place extensive frameworks for monitoring third-party vendor relationships.

The regulation comes on top of a punitive capital regime introduced in Europe for proprietary trading firms in the form of IFR/IFD, which entered into force in 2021 and is being implemented in phases.

“The sheer number of proprietary trading firms looking to relocate outside Europe is a significant concern,” says Ross Lancaster, head of research at Acuiti. “The departures will inevitably reduce liquidity and lower the competitiveness of European capital markets.”

Aleksey Larichev, CEO of Avelacom, says: “We are responding to the latest trend of firms moving into new jurisdictions and expanding into highly volatile markets. Avelacom operates in more than 90 data centers across 25+ key global markets with 40 cloud on-ramps, providing the necessary IT infrastructure. Long-term scalability, flexibility, and continuous IT updates are key to maintaining competitiveness in the financial services sector.”

Other key findings in this quarter’s report include:

• 2024 was another strong year for proprietary trading firms as a volatile Q4 boosted annual revenues
• 30% of proprietary trading firms reported a significant increase in costs in 2024 with exchange fees and market data fees seeing the biggest increases
• Just 27% of proprietary trading firms subject to DORA were fully compliant on the implementation date
• 44% of proprietary trading firms have deployed or are considering deploying back-ups in the event that the sabotage of under-sea cables impacts their ability to trade