TradeTech 2023: How can the sourcing of liquidity be streamlined?

With the UK and Europe’s poor liquidity landscape being agreed upon unanimously, panellists discussed a potential consolidated tape as a means to improve liquidity.

At TradeTech Europe 2023, panellists discussed the liquidity landscape within the UK and Europe, as well as what tools could be used to automate and consolidate access to untapped liquidity.

“The market has increased a lot, with the types of offerings that we’ve seen in the last year to some degree exploding. We on the buy-side are to some degree, see a bit of fatigue in terms of new products promising some sort of new experience towards liquidity,” said Emil Framnes, global head of equity trading and transition asset strategies at Norges Bank Investment Management.  

“The big problem that we have specifically here in Europe is that we don’t see that much participation from quite a lot of our buy-side. If you look at the investor base, the turnover rate is a lot lower in Europe versus Asia and the US. We’re talking about one third to half. That’s sort of the big issue here in Europe, the fact that we’re not seeing that active participation from the buy-side community.” 

Comparisons between the UK and Europe’s liquidity compared to other regions such as the US and Asia were made unapologetically, with panellist agreeing there is a huge gap and plenty of room for improvement to attract new investors.

“Anybody who has worked outside the UK or Europe knows just how poor our liquidity picture is. If you’re a US investor and you look at Europe, it just looks hideously complicated,” said Natan Tiefenbrun, president at Cboe Europe.

“The complexity in sourcing market data as an investor is difficult and of course, expensive. If you could buy pan-European data under a single license model from a single source, it will likely be an awful lot easier. So frankly, a consolidated tape. We speak to investors who want to be pan-European in how they invest, and they want a pan-European source of market data.”

The introduction of a consolidated tape as a means of improving liquidity is something panellists appeared to agree on, even if not necessarily seeing the tape as a remedy to solve all liquidity issues within the UK and Europe.

“It’s not a silver bullet, it’s not a panacea that a consolidated tape will deliver us in Europe the same sort of liquidity that we have seen in the US. It should still be able to drive some efficiencies,” said Simon Mason, head of equity products, UK and Ireland, SIX Swiss Exchange.

“Us, as venues, need to accept that and need to figure out how we can work constructively.”