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 fia.org/epta

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.