From commodity markets to algorithmic trading, Straits Financial Services' CEO walks through the impact of AI on the derivatives space.

Roger Quek, managing director and chief executive at Straits Financial Services, said that artificial intelligence (AI) is now affecting commodity markets in two powerful ways.

First, the build-out of AI infrastructure is creating a structural demand shock, driving sustained demand for energy and key metals such as copper and aluminum, which are essential to data centres and power networks.

Second, because these metals are energy-intensive to produce, AI is also creating a capacity constraint—if power supply can’t keep up, prices can move sharply rather than gradually.

“For futures and options trading in APAC, this means faster price discovery, more frequent volatility spikes, and stronger demand for options as hedging tools, particularly in energy and base metals where tail risks are rising,” said Quek.

According to FOW data (see Chart 1), the copper grade A futures contract on London Metal Exchange saw peak volumes of 5,051,275 contracts in January 2026.

Chart 1: Copper Grade A Futures Contract on LME

Quek believes that over the next 12 months, APAC regulatory developments in the derivatives space will likely have a strong focus on AI governance, market integrity and derivatives risk management.

“Clearer guidelines on the use of AI and algorithmic trading may be introduced by regulators,” he said. “They would be aimed at strengthening model governance, increasing transparency requirements, and implementing controls to prevent market manipulation or excessive volatility.”

He expects that regulators may implement tighter rules around market surveillance and data reporting.

“Exchanges and regulators across APAC appear to be investing in advanced monitoring tools to detect abnormal trading behaviour, especially in high-frequency and cross-border trading,” he added.

Margin, capital and risk management requirements may be refined, according to Quek, particularly for highly volatile commodities and energy products linked to structural demand shifts, such as those driven by AI and the energy transition.

Looking at macro factors beyond AI, Quek observes that global fiscal and monetary easing are driving greater participation and hedging in APAC futures and options markets, as lower funding costs and improved liquidity boost risk appetite and improve inventory management.

“In this supportive environment, futures benefit from higher open interest and liquidity, while options are increasingly used to define risk as baseline volatility moderates but episodic spikes driven by geopolitics, policy shifts and supply disruptions remain a feature of the market,” he explained.

This easing also shifts risk toward foreign exchange and curve dynamics, which is particularly relevant for APAC participants trading US dollar denominated commodities.

“Movements in the US dollar directly affect local currency costs, margins, and hedging effectiveness, leading to greater use of combined commodity and foreign exchange hedging strategies,” he said.

Zeroing in on Japan, which saw a historic rate hike of 25bps in December, Quek said that this signals a clear shift toward gradual but steady policy normalisation by the Bank of Japan (BoJ).

He noted that markets are expecting further increases on a semi-annual, data-dependent basis over the year ahead, potentially as soon as mid-year if inflation and wage growth remain firm. While the pace of tightening is likely to stay cautious, the BoJ is allowing greater yield flexibility, increasing two-way risk in rates, he added.

“For futures markets, this points to higher volumes and more active curve trading, while options markets should see structurally higher demand as volatility rises from previously suppressed levels,” said Quek.

Overall, Japan is moving closer to G10-style rate and volatility dynamics, albeit at a slower and more controlled pace.

Source: https://www.fow.com/insights/analysis-how-ai-is-affecting-futures-and-options-trading-in-apac