European execution landscape being fundamentally reshaped as Asset Managers transform from Liquidity Takers to Liquidity Makers

European execution landscape being fundamentally reshaped as Asset Managers transform from Liquidity Takers to Liquidity Makers

New report reveals equity and fixed-income markets at point of radical shake-up – and prompts calls for an overhaul of market regulation

Asset managers now hold the keys to liquidity provision on Europe’s capital markets in a fundamental shift in the financial ecosystem and its future development, a new study reveals today.

The widespread adoption of automated trading – which accelerated in the pandemic – has given asset managers greater direct access to new trading partners providing more efficient and diverse options to trade.

This empowerment is shifting the traditional balance of the markets as asset managers are increasingly becoming ‘liquidity makers’, rather than ‘liquidity takers’ relying solely on traditional sell-side provision of execution services.

These are the findings of a new report, published today, called Turning the Tables on Liquidity Provision, written by capital markets research specialists Redlap Consulting. It is the second research report in a three-part series on key trends in European markets, focusing on buy-side liquidity needs.

Significantly, this structural shift should prompt regulators to overhaul current markets rules, says Piebe Teeboom, Secretary General of FIA EPTA, the European industry body for market making firms, which commissioned the report.

“The pandemic has created an opportunity for a new eco-system to emerge. Asset managers are now increasing control over their order flow across both equities and, crucially, fixed income markets.

“It’s a real game-changer as the fixed income markets were the last bastion of sell-side liquidity provision. We’re witnessing a sea-change in the way the markets will operate in the future.”

– Report Author Rebecca Healey

“The trends identified in this report are significant as they signal a clear shift in the balance of liquidity provision in European markets. It’s a fundamental realignment which policy-makers should consider as they update the regulatory rulebooks in both the EU and UK.”

– Piebe Teeboom, Secretary General of FIA EPTA
The report shows how asset managers are increasingly turning to automated trading to execute their orders. And because of increased innovation in trade initiation, creation, and execution, they’re able to engage with more liquidity providers, including independent market makers.

These new systems help to solve traditional impediments in bond markets which prevented the buy-side from engaging with a more diverse and broader set of counterparties due to the infrequency with which bonds trade and the risk of incurring any information leakage. Now, the ability to automate trading intentions as well as order flow provides the buy-side with the ability to maximise potential engagement yet still protect information about the trade and prevent undue price movements.

Another key finding is that asset managers require better post-trade data to select the most appropriate counterparty to trade. Crucially, respondents want to better understand whether their order flow has provided or taken liquidity – which determines who they select as a trading counterparty.

Initiatives such as improved FIX Protocol tagging are already benefitting asset managers, but further improvements to post-trade data are needed, respondents reported.

The report – based on interviews with global heads of trading at 30 EU and UK based asset management firms with over $35 trillion of assets under management, found:


    • Nine out of ten respondents (87%) want to maximise their liquidity access with market making firms;
    • Seven out of ten respondents (70%) said data and technology continue to increase in importance in deciding where and how to trade;
    • Two-thirds of respondents (67%) said transparency is a key factor in the selection process of liquidity partners.

“Between 60-70% of our order flow was done on a bilateral basis historically. In the past six months that ratio has flipped. We are changing how we trade and who we partner with as a result.”

– The Head of Trading, Mid-Sized European Asset Manager
The report has been commissioned by FIA EPTA, which represents Europe’s leading market making firms, as part of its on-going efforts to provide thought leadership and insights to stakeholders on the key role that liquidity plays in well-functioning markets. In parallel, FIA EPTA recently launched a new campaign to drive greater understanding of what independent market making firms do, and their contribution to both financial markets and the wider economy.

“Market making firms are clearly a driving force in the evolution of the financial ecosystem. Their combination of technology, competition, innovation and capability to work with the buy-side provided a lifeline for many asset managers during the pandemic and has created the conditions for a fundamental reshaping of liquidity provision in European capital markets going forward.”

– Piebe Teeboom, Secretary General of FIA EPTA
Paradigm shift as market makers take center-stage

Paradigm shift as market makers take center-stage

Paradigm shift as market makers take center-stage in European liquidity provision during Covid-19 pandemic

  • New research report reveals independent market making firms becoming trusted partners to European buy-side after stepping up to support institutional investors during pandemic
  • Surveyed asset managers appreciate market makers’ continuous presence in the markets
  • Recognition accelerated by adoption of technology and screen-based electronic trading during lockdown

The ability of independent market making firms to provide essential liquidity to Europe’s pension funds and other asset managers during the Covid-19 financial crisis has accelerated their recognition as a vital part of the European capital markets eco-system.

A new research report surveying European buy-side participants reveals for the first time how market makers stepped up to help the asset managers when some of the traditional providers of risk capital partially withdrew from certain market segments in Europe in the early stages of the pandemic.

As asset managers – particularly small and mid-size funds — were seeking additional sources of liquidity the independent market makers were able to step up. This was made easier as the increasing electronification of the markets enabled asset managers and market makers to engage whilst working from home.

Now, clear signs are this shift is becoming permanent as asset managers better appreciate what market making firms’ offer as liquidity partners, including greater transparency and continuous presence in the markets.

These benefits mean investors can trade instantly and with certainty, enabling them to adjust their investment strategies and manage their risk.

The insights are published today in a new study called Liquidity in the Time of Covid. It Is based on detailed interviews with 30 EU and UK-based Global Heads of Trading at asset management firms holding $35.6 trillion collectively.

The study is written by independent financial services research group Redlap Consulting. It was commissioned by FIA EPTA, which represents Europe’s leading market making firms, to drive greater understanding of what independent market making firms do, and their contribution to both financial markets and the wider economy

Report author Rebecca Healey, founder of Redlap Consulting, said:

“Covid-19 continues to redefine the trading landscape as the pandemic lifted the veil on the role market-makers can play in liquidity formation.


“Liquidity challenges in bond markets early in the pandemic created a vacuum forcing the buy-side, to find new trading partners and access points to liquidity – and market making firms stepped up to fill the void.


“Now as asset managers continue to partner more directly with these firms, they have been able to benefit from a wider, more diverse pool of counterparties in how and where they can execute investment strategies; while liquidity providers have the opportunity to re-position themselves and build new partnerships.”


One Head of Trading at a large global asset manager interviewed for the report said: ““We definitely engaged more with [electronic liquidity providers]; as [some sell-side firms] stepped back, they stepped up.”

Piebe Teeboom, Secretary General of the FIA European Principal Traders Association, said:

“The clear message from this report is that asset managers have developed a far more detailed and positive understanding of market makers and the liquidity provision they offer.


The pandemic and, in particular, the lockdowns accelerated a longer-term shift towards screen-based trading as people were forced to find new ways of working. This created a watershed moment as the buy-side engaged more with market making firms – and consequently became more appreciative of the benefits of better and more transparent prices, the constant liquidity provision and optionality the firms offer.


“That reappraisal and recognition – similar to a light-bulb moment – has now cemented the role of market making firms as mainstream actors in the capital markets ecosystem.”

#WeAreMarketMakers Campaign Launched To Promote Better Understanding Of Market Making Firms In Europe

#WeAreMarketMakers Campaign Launched To Promote Better Understanding Of Market Making Firms In Europe

London 27 September 2021

A new campaign to promote better understanding of modern market making, what it does and its benefits for wider society, has been launched today.

#WeAreMarketMakers is a campaign by FIA EPTA, the European industry body for independent market making companies, as part of its 10th Anniversary activities. The project is not only supported by FIA EPTA’s 30 member firms, but also by others in the markets community that work directly with and alongside the industry.

The campaign seeks to help inform and educate stakeholders on the important role that market makers play: from providing liquidity to the global financial markets, to supporting citizens’ pension pots.

It also aims to debunk some of the myths surrounding the industry, and put forward the people and innovators behind the industry.

The #WeAreMarketMakers campaign will be led through an integrated communications campaign and built around a series of independently-produced thought leadership reports looking into liquidity provision, innovation and sustainable finance.

The first report – Liquidity in the Time of Covid1 – is being launched next Monday with a panel discussion at the International Derivatives Expo (IDX) conference in London. It focuses on the impact of the pandemic on liquidity provision and how market makers played a vital role supporting asset managers.

The campaign will also create a new microsite about the sector, explaining what it does and its contribution, with news articles, blogs and videos as well as data and facts about the industry. The campaign website goes into detail about how market makers benefit everyone in society, from pensioners, farmers, businesses and even governments.

Notes to editors 

  1. Liquidity in the time of Covid – a report by Redlap Consulting 

“Our industry can sometimes be hard to grasp and our presence and impact is not always obvious – but we are always present in the markets and have been fundamental to the resilience of European financial markets, including throughout the Covid-19 pandemic.

We are excited to bring our ten-year run of engagement with stakeholders to a new level with this campaign, and are keen to reach new audiences to make them aware of the tremendous contribution of market makers to well-functioning markets that benefit everyone in society.”

– Mark Spanbroek, Chairman of FIA EPTA