The continued rise of bilateral trading in secondary markets is a concern across markets in both the UK and Europe, according to a panel made up of watchdogs speaking at the EMEA FIX Trading Conference.
When asked what their greatest regulatory focus was for 2025 during a live poll, almost half (48%) of those present in the room responded that it was the impacts on price formation in public markets due to increasing bilateral trading.
In answer, the panellists highlighted the strong correlation between this point and increased inclusion into markets, including retail. The notion of a reversion to more ‘traditional’ methods is perhaps unsurprising, but certainly one which must be addressed, agreed speakers.
One explained: “It’s certainly true that markets are effective when there’s a choice of trading functionalities out there and we’re all conscious of the fact that when you change one aspect of market structure, you need to be mindful of the impact on the structure as a whole.”
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The experts further emphasised that discussions focused on the future of the optionality of systematic internalisers (SI) across the region will also remain key.
Of course, banks have continually offered systematic bilateral liquidity, however the potential for increased adoption is stirring as this landscape continues to evolve.
From the retail perspective
Following on from the conversation on the rise of bilateral trading, panellists were questioned on how retail investors will also be able to get involved in that and what should be front of mind as this continues to play out into the future.
What remains key here, is the notion of choice, coupled with confidence in the markets. As one speaker explained: “Building that confidence is not the job of regulators only, it’s the job of everybody […] what we see is people not understanding markets, if you look at the way markets have been designed, they’ve been designed for well behaving companies that publish quarterly earnings and so on with steady growth.”
Addressing about the issue of inclusion as regards the retail side, the experts highlighted the importance of protecting investors and the role of education in this.
“Looking at the idea of the education of retail investors, it goes back to this whole debate around looking at the market and actually being able to trust what you see in terms of the data, the reporting.”
At the same time, not strangling innovation with over-regulation was also brought to the fore.
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“It’s important to remember that this does take time. You cannot say ‘okay, we will develop education and tomorrow we will have masses of people investing,’ it requires a holistic view and several things being done at the same time […] at the same time not over protecting is important.”