We’ve been speaking with the community ahead of our EU Equities Members Meeting on 23rd January 2025 to uncover emerging key themes, which are set to shape both the agenda for the meeting and the year ahead for our buy side members.
Liquidity: The Ever-Present Challenge
Liquidity remains a core focus for our members, with European markets presenting unique difficulties. Members report fragmented venues and declining participation from traditional liquidity providers, making it harder to execute trades efficiently.
Market fragmentation is a significant challenge. While multiple venues are beneficial, it can be difficult to determine where the actual liquidity lies.”
To combat these issues, many desks are turning to dark pools, block trading platforms and high-touch broker relationships. However, reliance on these solutions has its limits. One trader noted, “Relying on dark pools can feel like hoping and praying liquidity will be there. A more active approach to sourcing liquidity is essential.”
Efforts to address this are ongoing, with growing emphasis on developing technologies that streamline access to liquidity pools while reducing market impact.
Automation and Efficiency: The Way Forward
Automation is no longer a luxury but a necessity for buy side desks looking to streamline operations and reduce manual inefficiencies. Straight-through processing (STP) and advanced TCA tools are becoming central to operations, particularly for passive trading strategies.
We’re planning to introduce auto-ordering for equity baskets on the passive side, automating as much as possible since we’re not adding value manually.”
Yet, smaller desks face resource constraints when balancing automation with the personalised touch required for active trades. This has created an industry divide, with larger firms leading the charge while smaller players adopt solutions more gradually.
Innovation in Market Structure
The drive to modernise trading processes, such as the new issuance and IPO process and auction mechanisms, is accelerating. Greater transparency and electronification of the issuance & IPO workflows, for instance, is seen as a vital step toward reducing inefficiencies and improving accessibility.
The IPO process is archaic. We need a centralised portal where demand can be inputted and automatically distributed to all relevant sell side parties.”
Meanwhile, auction mechanisms, such as those being introduced by platforms like CBOE and Aquis, offer new avenues for reducing market impact and ensuring fairer pricing. These innovations are crucial as traders seek more robust tools to manage liquidity fragmentation and optimise execution.
Looking Ahead
As we move into 2025, equity trading desks are focused on three key priorities:
- Enhancing liquidity access through innovative platforms and active engagement with liquidity providers.
- Scaling automation to improve efficiency and reduce costs while maintaining flexibility for active strategies.
- Driving collaboration across the buy side to address systemic challenges and share best practices.
Our January meeting will be a crucial platform to continue these conversations and drive actionable outcomes for the year ahead.
Secure your spot today and be part of shaping the future of equity trading as part of a collective buy side voice.
