#WeAreMarketMakers and the paradigm shift in liquidity provision

Rick Steves

This is a paradigm shift that will benefit asset managers, who can count on market-making firms as their liquidity partners offering transparency and presence.

FIA EPTA, the European industry body for independent market making companies, has launched a new campaign to promote better understanding of modern market making, what it does, and its benefits for wider society.

#WeAreMarketMakers seeks to inform and educate stakeholders on the important role that market makers play: from providing liquidity to the global financial markets, to supporting citizens’ pension pots, while debunking the myths surrounding the industry.

The campaign will also be publishing a number of research reports on the matter, the first being Liquidity in the Time of Covid, surveying European buy-side participants and revealing how market makers stepped up to help the asset managers when some of the traditional providers of risk capital partially withdrew from certain market segments in Europe in the early stages of the pandemic.

The report includes a number of key findings:

  •  91% of respondents noted improved access to automated and diverse sources of liquidity during the March-April 2020 volatility period compared to the crisis of 2008.
  • 77% of respondents increased their means of accessing liquidity electronically and automated trading during the pandemic.
  • 53% of respondents took the opportunity to diversify their means of who they trade with to access to liquidity.
  • 70% of respondents are engaging more with alternative liquidity providers

This is a paradigm shift that will benefit asset managers, who can count on market-making firms as their liquidity partners offering transparency and presence, and investors, who can trade instantly and with certainty, enabling them to adjust their investment strategies and manage their risk.

The survey was conducted by Redlap Consulting and commissioned by FIA EPTA. 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.”

Piebe Teeboom, Secretary General of the FIA European Principal Traders Association, said: “The clear message from this report is that asset managers have developed a far more detailed and positive understanding of market makers and the liquidity provision they offer.

 

 

Read this next

Retail FX

ThinkMarkets expands CFDs lineup to over 4000 ETFs and shares

ThinkMarkets has expanded its service offering by incorporating 2500 new CFDs on shares and ETFs on its ThinkTrader platform.

Retail FX

France regulator warns investors of Omega Pro, Businessempire.fr

France’s financial markets regulator alerted investors that scams related to Omega Pro Ltd are beginning to circulate, with the blacklisted firm capitalizing on the situation to run a range of “unrealistic” offers.

Digital Assets

Web3 platform Grand Time paid $2 million in token earnings to date

Community-driven Web3 platform Grand Time said its offering – which includes a multifaceted platforms and its native token – has been gaining significant traction highlighted by impressive operational metrics.

Institutional FX

FX volumes at MOEX halved in April as ruble gains gorund

Currency trading at Moscow Exchange (MOEX) halted its upward route in April as monthly volumes nearly halved from a month earlier.

Digital Assets

FTX US adds stock trading, fractional shares to crypto platform

FTX US, the American subsidiary of crypto exchange FTX has kicked off stock trading feature to its customers in an effort to compete with popular platforms such as Robinhood and eToro.

Industry News

UK FCA empowered to remove brokers’ permissions in 28 days

Businesses with permissions they don’t need or use, risk misleading consumers. These new powers will enable us to take quicker action to cancel permissions that are not used or needed.

Industry News

CFTC charges $44m Ponzi scheme but millions may have fled to foreign crypto exchange

The CFTC alleged that defendants transferred millions of dollars to an off-shore entity that, in turn, may have transferred funds to a foreign cryptocurrency exchange. None of these funds were returned to the pool.

Technology

Saxo Bank deploys Adenza to address Basel and EBA requirements

The integration of ControllerView will enhance Basel-driven capital calculations and reporting at Saxo Bank in support of the bank’s multijurisdictional capital and liquidity reporting requirements throughout Denmark, Switzerland and UK, with plans to expand into the Netherlands.

Executive Moves

ComplySci appoints CTO, CPO, and CLO to further regtech’s product expansion

ComplySci offers compliance software used by more than 1400 global institutions to identify risk and address regulatory compliance challenges.

<