FIA EPTA survey: Half of European market makers provide liquidity in ESG products

Around half of European market-making firms surveyed by FIA European Principal Traders Association (FIA EPTA) are actively providing liquidity in ESG financial products, playing an important role in the global transition to sustainable investing.

FIA EPTA, which represents Europe’s leading independent market making firms, conducted the survey in February, with 19 of its 24 member firms across Europe (EU and UK) participating. FIA EPTA members function as key liquidity providers for exchange-traded and cleared markets, meaning that they post bids /offers and quotes to trading venues on a continuous basis.

Respondents to the survey saw the most demand for liquidity from investors in ESG exchange-traded funds (ETFs). That marked a change from its previous survey which FIA EPTA conducted a year ago, when there was greater demand for liquidity for futures based on ESG indices.

The market making firms surveyed are active on a wide range of venues listing ESG products, with Euronext, the London Stock Exchange Group, Deutsche Börse / XETRA and Eurex being the most popular venues among respondents. Other survey findings show that half the firms have been approached by exchanges for support on new ESG products, although only 12% have been approached by clearing banks or buy-side participants.


Crucial role in climate goals

The survey follows the release of FIA EPTA’s Principles on Sustainable Finance and ESG in June 2021, and a white paper on the importance of secondary markets for the transition towards sustainable capital markets, published in October 2022. Both set out how independent market makers and liquidity providers can contribute to achieving Europe’s goal of climate neutrality by 2050.

Market makers play a crucial role in the green transition by providing continuous liquidity and making ESG based products more attractive and available to investors. Pricing competitively by showing a tight bid-ask spread helps minimise the cost of investing in such ESG products, which can help investors reorient capital to sustainable investments.

“Market makers continue to be committed to trading ESG products, giving investors the confidence they need to include ESG products in their portfolios and investment strategies,” says Rutger Vijgen, public affairs advisor at FIA EPTA.

“When it comes to new financial products, investors want to be sure that there is always a market for that product. By providing continuous liquidity, market makers guarantee there is always someone providing prices in the market, even in volatile circumstances. This allows investment managers to adjust their portfolios, pursue their trading and investment strategies and manage their risk, at low cost and with ease globally,” Vijgen says.


Market Conditions

According to the survey, market conditions in 2022 triggered by the war in Ukraine and the energy and cost-of-living crises did not affect how market makers view ESG products – with one saying that it had become even more interested in providing liquidity in this area.

Discussing the main challenges to expanding ESG coverage in their trading/liquidity provision activities, 38% of firms pointed to a lack of interest from end-investors/counterparties in sustainable finance/ESG products, with one firm saying, “The main limitation is waiting for more end-investor interest.”

FIA EPTA members see an absence of transparency and standardisation in ESG ratings and data as a barrier for investors to start or expand trading in ESG products. This is substantiated by a report that FIA EPTA published in 2022 based on interviews with 35 ESG experts from asset managers. FIA EPTA is a strong supporter of the announcements made last year by the European Commission and the UK Financial Conduct Authority to regulate the ESG ratings and data market.

Just under 40% of firms cited maturity of the product ecosystem (underlying futures, options, ETFs) as a challenge, with 32% pointing to fragmentation of liquidity across comparable products.

When it comes to improving their own sustainability performance, two-thirds of the firms surveyed (65%) said they were either carbon-neutral or had started making reductions.

“Each year we ensure we are carbon neutral through the purchase of carbon credits. [We are] in process to create a 2050 net zero plan,” one firm said.

More than half of the firms said they had started preparations for potential future disclosure requirements on their ESG strategy, targets, and objectives, with the majority saying they will disclose this information on their website or in their annual reports.


Diversity and inclusion

The survey also included questions about diversity, inclusion, and well-being − a component of the “social” pillar of ESG − and found that all participating firms have diversity, inclusion and well-being policies and practices in place.

Two-thirds of firms surveyed have made changes to their recruitment process to make it more inclusive, and just under 70% of firms have reviewed their remuneration structures to address possible gender pay gaps.

Sustainable Finance Paper I: “Enabling the Transition”

Sustainable Finance Paper I: “Enabling the Transition”

FIA EPTA members are committed to supporting the transition towards a greener and more sustainable financial services sector that supports the common goals of net neutrality in 2050. We understand the importance of sustainable finance in achieving this goal, which has inspired us to create a three-part series of Sustainable Finance Papers.

The series delves deeper into how we are supporting the transition to a sustainable finance framework to combat the devastating effects of climate change. This includes encouraging our members to accelerate the uptake of ESG products in European Capital Markets, include ESG products in the range that they provide liquidity for and establish functional internal policies to support their sustainability efforts.

In our first paper of the series, Enabling the Transition, we explore the crucial role that secondary markets play in a successful green transition and voice our concerns about unintended consequences under Sustainable Finance Disclosures Regulation (SFDR) in the EU, which restricts the use of Exchange Traded Derivatives that are becoming a core component of sustainable investment strategies and significantly reduces funding and financing costs and helps to manage risk.

Read the first paper on our website here Enabling the Transition; FIA EPTA member’s commitment to supporting the transition toward sustainable capital markets | FIA, where the full series will be published by the end of 2022.

Redefining Value in ESG – Download The Report

Redefining Value in ESG – Download The Report

Growing public appetite for more sustainable investment is being held back by traditional approaches to investment – a new study of global asset managers reveals.

Consequently, the policymakers’ goal towards creating a greener and more sustainable economy risks being undermined unless we can create a more principles-based and outcome-focused approach.

The report identifies two main concerns:

    • Greenwashing risks caused by incomplete or deficient ESG data;
    • And, in parallel, over-reliance on traditional exclusions-based investing, which can cause asset inflation

To address these, asset managers need new ways to generate and manage better actionable data – and insights – that help reveal the full sustainability story about potential investments, so they can invest with more confidence and impact.

Redefining Value in ESG: The Myriad of Paths to the Summit’, is the third and final report commissioned by market maker industry association FIA EPTA on key strategic trends in European markets, focusing on buy-side needs in relation to ESG and sustainable investing.

The report finds a new, broader concept of ‘value’ is needed, which reflects more than just commercial outcomes and recognises other factors, for example, alignment to the UN’s Sustainable Development Goals (SDGs).

EUREX EPTA Webinar Brings Together Industry Experts to Assess Rapid Pace of Innovation in Bond and Fixed Income Markets 

EUREX EPTA Webinar Brings Together Industry Experts to Assess Rapid Pace of Innovation in Bond and Fixed Income Markets 

More democratic access, truly bespoke trading, and new asset classes about to emerge.

This was the picture painted for the future of Europe’s capital markets on a FIA EPTA-Eurex Group co-hosted webinar on December 2. The landscape is being transformed as a consequence of fundamental shifts in liquidity provision, the rise of automated trading, and a thirst for innovation.

And these changes have already disrupted the traditional buy-side/sell-side relationship and seen asset managers moving from liquidity takers to liquidity makers.  

The webinar was centred on the impact of Covid on liquidity provision in Europe’s capital markets, the structural shifts which are taking root and the implications for future market development.

It featured Robert Miller, Executive Consultant with Vanguard Asset Management, Mike Kuehnel CFO of Flow Traders,  Piebe Teeboom, Secretary General of FIA EPTA, and Jonas Ullman, COO ofEUREX. It follows a new research report written by Redlap Consulting and commissioned by FIA EPTA – which represents Europe’s market-making community – detailing alternative liquidity providers’ growing role and their embrace by the buy-side.

Contrary to what most expected at the time, panelists agreed the pandemic had actually opened the gates to a new wave of innovation. This was made possible by the adoption of electronic trading, an innate advantage for independent market makers who have seen their reach multiply. With capital markets drying up during the pandemic’s peak, these alternative liquidity providers earned themselves the buy-side’s trust by jumping in to keep the wheels of the finance going.

As a result, many capital allocators are now seeking to change their liquidity formation practices. Redlap’s survey shows 53% have already done so, a deep shift for an industry with entrenched habits. The rise of electronic trading and ETFs,  providing more price data for corporate bonds and price discovery, have helped cement these changes even as pandemic turmoil withdrew.

The webinar, which addressed last year’s liquidity turmoil, lessons learnt from the crisis, and the future of liquidity formation, became most animated when discussing ongoing technological innovations. 

Market participants shifting to electronic execution are harnessing a transparency not seen before. This is enabling all participants (retail and institutional) to understand what liquidity is available, where it resides, and how to engage with it. Innovation in alternative asset classes is contributing to the buy-side ownership of the order routing processes becoming truly agnostic. The future of liquidity formation will also include advances in pricing mechanisms – the traditional role of inventory vs liquidity premium/discounts – along with a growing use of ETFs in Fixed Income.

Further driven by a parallel rise in retail involvement, these developments are altering the market eco-structure. 

 The diversification of liquidity providers will continue to increase democratic access, leading up-and-coming challengers to improve offerings and prices. Panelists hoped these developments would change regulators’ approach from a more reactive approach to being one of a pro-active architect, enabling innovation and choice for end-investors.

Panelists reminded the audience that all have a role to play in engaging with regulators, ‘’to build the foundations of a forward-looking market architecture’’. Importantly, there is a need to demonstrate the industry’s positive impact in the lives of everyday European citizens who rely on firms for their pensions.   

The final portion of the talk was dedicated to the hopes panelists had for the future of capital markets. Opinions ranged from  embracing asset classes not yet in use to ever more transparent data for the buy-side. Some posited reduced frictions for capital mobility will increase retail participation, and illiquid assets today will become increasingly liquid through tokenization.

However, all agreed it was necessary to partner with policymakers and regulators to keep laws in line with the rapid pace of market innovation.  As summarized by one speaker: ‘’What I dream for the future is of a European capital market that truly achieves better outcomes for society and for the end investor. We are working towards a fully integrated single market for financial instruments and a shared consolidated tape.’’ Looking back ten years from now, panelists asserted 2020 – 2021 would be seen as pivotal years for liquidity provision, and as catalysts for renewed innovation in finance. 


Turning The Tables On Liquidity Provision – Download The Report

Turning The Tables On Liquidity Provision – Download The Report

Europe’s trading landscape is being fundamentally reshaped as asset managers transform from ‘liquidity takers’ to ‘liquidity makers’. Our new report Turning the Tables on Liquidity Provision lays bare the changes taking place in the UK and EU’s capital markets as the after-effects of the pandemic continue to be felt.

In particular, equity and fixed-income markets are at the point of a radical shake-up as the buyside settles into the liquidity driving seat. And the impact has prompted calls for the current regulatory rulebook to be overhauled to keep pace with the changes, or risk falling behind.

The new report is written by capital markets research specialists Redlap Consulting and is the second in a three-part series on key trends in European markets, focusing on buy-side liquidity needs.

“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 report reveals 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.

Piebe Teeboom, Secretary General of FIA EPTA, the European industry body for market making firms, which commissioned the report.

“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

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, the report 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
‘Liquidity in the Time of Covid’ – Download the report

‘Liquidity in the Time of Covid’ – Download the report

Covid-19 continues to redefine the trading landscape in Europe. Changes in liquidity formation already in play due to the increased use of automated trading and rise of passive investing were accelerated
as traders rushed to make changes to investment strategies due to the pandemic. Remote working, greater reliance on cloud technology and the high volatility early in the pandemic created new additional challenges which is resulting in the industry rethinking trading partners and access points to liquidity.

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.

Redlap Consulting conducted interviews with 30 Global Heads of Trading at asset managers with $35.6 trillion (€30.36trn, £25.9trn) in assets.

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.”

The FIA European Principal Traders Association (FIA EPTA) represents Europe’s leading Principal Trading Firms. Its 30 members are independent market makers and providers of liquidity and risk transfer for end-investors across Europe. It works constructively with policymakers, regulators and other market stakeholders to ensure efficient, resilient, high-quality financial markets. To find out more visit

The report is the first of three being produced to mark FIA EPTA’s 10th anniversary which is being marked by 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.