Liquidity Landscape: Q1 2026 EMEA volatility – Transitory dislocation or a new baseline?
The Q1 2026 Liquidity Landscape report reflects on a quarter shaped by record European trading volumes, persistent volatility, and a market structure increasingly driven by automation, regulatory change, and geopolitical disruption.
Volatility has become the new normal.
European equities opened 2026 at record highs, with the STOXX 600 peaking in late February as investors continued rotating out of US tech. Trading activity reached its highest level in five years, with total notional up 20% on Q1 2025 and average daily notional reaching €72.4 billion. The quarter also delivered a more compressed sequence of shocks than anything seen in 2025, from renewed tariff threats and the Greenland annexation saga to the early February AI disruption scare and the early March conflict in Iran, which pushed the VSTOXX back to the levels last seen on Liberation Day.
What makes this quarter interesting?
Unlike previous periods of intense stress, the rotation back into lit continuous trading was more subdued this quarter. Lit continuous market share rose by just 1.4 percentage points, and only 0.3 points excluding rebalance dates, compared to a 1.9 point rise in Q1 2025. Low-touch default routing now hosts greater use of periodic auctions and systematic internalisers, enabling investors to respond to volatility across multiple venue types rather than making a singular shift to lit. As execution becomes more systematic, large observable swings in market share are becoming less common.
Systematic internalisers continued to grow, rising to 13.2% of traded notional. Closing auction volumes fell across every European market as elevated urgency pulled flow forward into the continuous session. Periodic auctions consolidated near their structural high of 10.5%, supported by the introduction of ESMA's Single Volume Cap in October 2025. OTC market share fell sharply, from 13% in Q4 2025 to 9.6%, consistent with a higher volatility environment where investors prefer smaller, higher-frequency execution over large block or high-touch workflows.
Why this matters now
Q1 2026 points to a fundamental shift in how markets absorb stress. Volatility no longer automatically drives order flow back to continuous lit trading, as automation and smart order routing now distribute flow across a connected set of execution options. Regulatory reforms including the consolidated tape, the MiFIR Review, new SI transparency obligations, and the FCA's Wholesale Markets priorities are reshaping how liquidity is identified and reported. AI is also entering the execution stack, making order flow more time-compressed and concentrated around key events.
The competitive edge is no longer the speed of execution, rather the ability to intelligently navigate a fragmented, data-rich, and increasingly autonomous market structure.
Other notable trends:
Q1 recorded the highest European trading volumes in five years, surpassing even the post-US election surge of early 2025
The closing auction declined from 22.7% to 21.5%, with the sharpest falls in large and mid-cap names
(*Addressable liquidity excluding OTC/off-book on-exchange volumes excluding rebalance/expiry dates).Regional differences were pronounced: UK OTC share fell from 17.8% to 11.4%, while Germany's off-book on-exchange activity rose against the broader trend
(*Addressable liquidity including OTC/off-book on-exchange volumes)
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