Liquidity Landscape: Europe back in vogue?
The Q1 2025 Liquidity Landscape report captures a transformative quarter in European equity markets marked by a surge in trading activity and evolving liquidity dynamics.
Bilateral trading now commands nearly half the market
This quarter, we took a deep dive into non-addressable liquidity to try and understand the true size of this area of the market. Executions marked as “off-book, on-exchange”, OTC, and those marked as benchmark flow, now represent approximately 36% of total European equity volumes - up from 21% just four years ago.
Why is this interesting?
We know that off-book, on-exchange is used by many firms to report negotiated bilateral executions, so the growth is striking. In addition, when combined with Systematic Internaliser (SI) and Dark activity, approximately ~50% of market activity now occurs outside traditional, on-exchange venues.
This shift is not just technical, it has implications for execution strategies. Market participants who do not account for this bilateral activity risk:
Understating actual market volume, leading to inflated participation rates;
Higher implicit trading costs, due to thinner lit venue liquidity;
And reduced fill rates, as smart order routers miss large portions of addressable liquidity.
Why this matters now
The growing importance of bilateral liquidity comes amid broader volatility and regulatory reform. As the EU explores market structure changes, such as consolidated tape design and potentially Reg NMS-style rules, understanding and engaging with non-displayed liquidity is no longer optional. It is central to competitive execution and best practice.
Other notable trends from Q1:
European equity volumes surged 33% YoY, with March seeing record activity.
Lit continuous market share increased, reflecting a need for immediacy amid geopolitical uncertainty.
Closing auctions declined in share, as investors shifted to intraday execution.
SI volumes rose 51%, in line with the broader rise in market liquidity.
Please refer to the full report for sources
Gareth Exton Head of Execution + Quantitative Services EMEA, Prashanth Manoharan Head of Execution Consulting, and Henry Baugniet Equities Execution Data Analyst , in partnership with Rebecca Healey, Redlap Consulting