Traders’ concerns moving away from liquidity and re-focusing on inflation, finds latest JP Morgan e-trading survey

Global head of macro e-trading at JP Morgan says the survey results signal traders’ confidence around liquidity for 2024, driven by advances in electronic trading.

Traders’ concerns have migrated away from liquidity access and re-focused on inflation for 2024, JP Morgan’s latest annual e-trading survey has found.

Roughly 30% of traders across asset classes pegged inflation to have the greatest impact on markets in the year to come, followed closely by the US election and recession risk. The second half of 2023 was plagued by turbulent and divergent changes to central bank policy across the globe and JP Morgan’s latest findings suggest traders expect to see more of the same in the year to come.

“Even against the backdrop of a busy year of elections around the globe and an uncertain geopolitical landscape, it’s more proof that interest rates and central bank policies remain front of mind for investors. They are a huge mover of the markets,” said global head of macro e-trading at JP Morgan, Chi Nzelu.

Elsewhere, for the second year in a row, traders across asset classes have highlighted volatile markets as the biggest predicted daily trading challenge, also topping concerns around liquidity. When segmented by asset class, traders’ specific daily challenges diverge. Credit and cash equities traders highlighted liquidity availability as their greatest challenge, while commodities and equity derivatives traders highlighted the availability and cost of market data.

For JP Morgan’s Nzelu, the move away from concerns around liquidity across the board suggest a level of confidence in the market, driven by developments in electronic trading.

“The market is coming off the back of an interesting year, with a number of market shocks in the financials space, including the region banking crisis in the US,” said Nzelu.

“As electronic trading appetite continues to increase across all asset classes, this has helped liquidity availability to stand firm, and help the markets function pretty well. This year’s survey is telling us investors are expecting a similar pattern – market shocks but a level of confidence in the market to withstand them.”

When assessing traders’ sentiment towards market structure themes in 2024, JP Morgan’s findings saw fragmentation drop off the list of market structure concerns of traders, with not one respondent highlighting it for the year to come. The majority instead suggested their attention was now turned towards regulatory change and market data access and costs among others.

All respondents of this year’s e-trading survey said they expected to see an increase in electronic trading activity. Rates, commodities and foreign exchange have been pegged to see the largest increase in electronic activity in the year to come.

Corporate bonds were predicted to have the ‘most developments’ in electronic trading in 2024 followed by exchange traded finds (ETFs) and government bonds. Since 2022, electronic volumes have increased by 19% in emerging markets rates, 18% in G10 rates and 12% in credit trading, JP Morgan’s survey found.

Read more – Europe’s corporate bond markets are the most electronic in the world

The 2024 report had direct connectivity focus, with institutional respondents asked to highlight what they believe to be the greatest benefit of the capability to be. Around a third said access to liquidity and inventory – this was highlighted in particular by credit and spread traders – followed by reduced execution and brokerage cross.

Respondents were also asked which features kept them coming back to their favourite trading application or platform – aside from pricing and execution. Respondents to the 2024 survey highlighted user-friendliness of the platform as the top feature, followed closely by availability of data and analytics.

Artificial intelligence and machine learning were once again pegged by institutional investors as the most influential in shaping the future of trading. G10 rates, emerging markets rates, and credit traders highlighted API integration as the most important development to shape trading.

“Trading is very rich in data, so lends itself well to machine learning and AI and clearly respondents are very excited about the possibilities, and they’re right to be,” said Eddie Wen, global head of digital markets, JP Morgan. “For trading, it’s early days but the potential is certainly there in certain pockets of the trading floor. The real value will be combining the technology with the ideas, creativity and the relationships traders hold with clients.”

In terms of digital assets, when asked for plans for the year to come, 78% of institutional investors surveyed said they had no plans to trade crypto or digital assets.JP Morgan’s 2024 survey had 4010 institutional trader respondents across asset classes, with the majority (27%) of respondents having 20 or more years of experience.