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Sentiment across global derivatives markets remained historically high in Q2 2025 despite a slight decline from record levels, according to the latest 2025 Q2 SGX Global Market Sentiment Index Report produced by Acuiti.
The overall reading fell to 74% this quarter from its record high of 78% in Q1 2025, but remains well above average levels. The survey polled 588 senior executives across hedge funds, proprietary trading firms, asset managers and sell-side firms between January and February.
Business confidence had soared last quarter following proposed deregulation in the US and expectations of increased market volatility due to radical approaches taken by the new US administration. However, concerns are now growing in some areas of the market regarding the extent and unpredictability of US government policy.
Regional divide emerges
A stark regional divergence has emerged, with confidence in North America rising sharply from 82% to a record high of 89%, while European sentiment dropped from 81% to 73%. Confidence in APAC remained flat at 72%.
"The decline in European sentiment reflects growing concern among executives over the implications of an 'America First' trade policy and the possibility that US deregulation could create an uneven playing field for European firms," the report stated.
The volatility seen during early April proved to be the key event informing views this quarter. Following the US administration's imposition of "retaliatory tariffs" on April 2, global markets experienced extreme swings before recovering losses by May.
Record volatility drives volumes
The five trading days between April 4th and 10th were the top five largest intra-day point swings in the S&P 500 since it was formed in 1957. This boosted volumes in equity futures and options trading, with record volume days posted across multiple exchanges.
According to the FIA's ETD Tracker, volumes on European and North American markets were up 25% and 32% year-on-year in Q1 2024. Trading in currencies on global exchanges hit 177 million contracts in April, while energy and metals also reached highs.
"Volatility generally benefits firms involved in derivatives markets, as it leads to higher volumes and more opportunities to trade around market movements," the report noted.
Sell-side optimism remains strong
For the second consecutive quarter, sentiment was highest among sell-side clearing providers, many of whom experienced record daily volumes during the early April volatility. Overall, 81% of sell-side execution executives were optimistic about the next three months, compared with 84% last quarter.
Sentiment among sell-side clearing executives remained at near record highs. "The volatility of April resulted in significantly above average volumes and, while there were processing issues in some corners of the market during the volatility, clearing infrastructure held up well," according to the survey.
Mixed performance across sectors
Proprietary trading firms also reported elevated optimism at 81%, with ultra-low latency firms the most confident at 91%. The report noted that "proprietary trading firms thrive on volatility and it is no surprise that optimism rose this quarter in the wake of the market disruption in April."
However, sentiment among hedge funds fell sharply to 61% after three quarters of positive growth. "Much of the decline was driven by declining sentiment among firms that focus on managed futures strategies, many of whom experienced losses during the volatility in April," the report found.
Asset managers remained the most pessimistic group, with sentiment dropping to 69%. European asset managers were significantly more pessimistic than their US and APAC peers, facing "intense competition and fee compression at a time when ESG, in which many have invested significantly, is falling out of favour."
Crypto adoption challenges persist
The report also examined institutional adoption of cryptocurrency trading, finding that only about 12% of institutional firms are currently engaging with digital assets. This suggests "the next wave of institutional adoption may take longer than previously anticipated."
For sell-side firms, regulatory uncertainty remains the biggest barrier to crypto adoption, while hedge funds cite the lack of trusted, regulated venues as a major challenge. Operational challenges featured in the top three barriers across all firm types.
The launch of perpetual futures on regulated exchanges like SGX was highlighted as potentially addressing many critical challenges firms face when considering crypto trading in Asia, including alignment with local regulatory frameworks and improved operational efficiency.
