Liquidnet at International TraderForum 2025

Gareth Exton | Head of Execution and Quantitative Services, EMEA

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What's going on

The rise of alternative execution venues and platforms in recent years has sparked speculation about the potential decline of primary exchanges and lit trading. This ongoing debate draws strong opinions from both sides: those who advocate for the continued support and expansion of primary exchanges, and those who believe there are more efficient methods of trading, highlighting the drawbacks of lit markets.

Why it matters

There's no definitive answer to this debate. The market turbulence experienced in late March underscored the critical role that lit continuous trading still plays, especially during volatile periods. For buy-side traders seeking to execute their positions, the certainty provided by lit markets, thanks to their transparency and stability, was invaluable.

However, this very transparency can be a double-edged sword. Post-trade analysis frequently reveals that lit markets often experience post-trade reversion and tend to have the smallest execution sizes among all execution venues. Periodic auctions have helped to improve those outcomes in some cases and is one of the main reasons they are now close to 9%(1) of overall market volume. It's this growth, combined with that of lit MTFs, that explains why lit venues still represent over 50% (2) of total market volumes, despite the decline in primary exchange share.

Rather than attempting to curtail the growth of alternative platforms and limit choices, perhaps the industry should concentrate more on encouraging trading on lit venues. This could be achieved through the introduction of new functionalities or enhancements to existing ones, along with commercial incentives.

Lit trading isn't disappearing, but it clearly needs to adapt and innovate to maintain its share of the overall market.

1 BMLL September 2025

2 BMLL September 2025

Questions to ask

1. Do you think there is a point at which the lit primary stops being valid for price discovery?

2. Will the consolidated tape improve the situation?

3. Are periodic auctions as non-toxic as they used to be given their size and improvements in connectivity?

James Whitehead | Head of Trade Coverage, EMEA

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What's going on

Emotions often run high due to the significant impact bilateral trading's growth is having on the industry. However, it's worth remembering that risk trading has always been part of the market landscape. Whether through broker crossing networks, central risk books, or high touch services, access to risk has consistently been a key component of the buy-side's liquidity profile. What's changed is how MiFID II has increased transparency, prompting liquidity providers to update their operating models and bringing the debate into the open.

Why it matters

Off-exchange trading, including Off-book/On-exchange, SI trades, and "benchmark" trading, now accounts for 50% of the overall market according to Liquidnet's recent Liquidity Landscape report.

This growth in bilateral liquidity means it's crucial for market participants to understand its size, availability, and how it can be accessed. Additionally, they need to determine if it complements their liquidity needs.

The panel brings together liquidity providers, who have expressed differing opinions on how they prefer to distribute their liquidity. Some have historically aimed to establish direct relationships with consumers, while others have opted to distribute their liquidity through partners.

Both models have their advantages, but we believe Liquidnet members want to control when and how they interact with this liquidity, using tools and workflows they are already familiar with. That's why we were excited to announce the launch of our new buy-side solution to access bilateral liquidity earlier this week. This product helps Members access bilateral liquidity by partnering with XTX and three other liquidity providers from day one, eliminating the need for additional legal onboarding, KYC, or technical implementation.

Regardless of how Members choose to access bilateral liquidity, it's clear that this part of the market will continue to evolve as regulations, liquidity providers, consumers, and workflows change. One thing is for sure, this won't be the last panel on this subject at industry conferences!

Questions to ask

1. Isn’t there a conflict between when in the order lifecycle the liquidity taker wants the liquidity vs. when the liquidity provider wants to provide it?

2. How can liquidity takers and makers work together to make the liquidity partnership worthwhile for both sides?

3. Will I always get a better price if I tell the liquidity provider who I am?

Michael Fidance | Head of CEEMEA (Central, Eastern Europe, Middle East, Africa) Equities Markets

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What's going on

Sovereign wealth funds from Saudi Arabia and other Arabian Gulf nations are increasingly channeling capital into Chinese IPOs listed in Hong Kong, signaling a deepening financial alliance between the Middle East and Asia. Just last year, CSOP Asset Management launched the first Hong Kong-listed ETF tracking Saudi equities market, with the Saudi Public Investment Fund serving as anchor investor.

China and Saudi Arabia have also been reportedly negotiating the cross-listings of each other's ETFs, paving the way for reciprocal market access. These developments reflect a strategic push to potentially unlock new liquidity across APAC.

If we stick to the facts, it seems that the Middle East–Asia corridor is emerging as a vital conduit for capital, one that could reshape the landscape of cross-border EM engagement.

Why it matters

Amid ongoing geo-economic uncertainty, the initiatives between the Chinese and Saudi Arabian capital markets appears remarkably prescient.

New sources of liquidity are undoubtedly beneficial for both markets. Saudi Arabia’s 18+ months of underperformance underscores the need for differentiated, uncorrelated directional investment. MSCI EM-benchmarked funds remain significantly underweight, while local investors appear cautious amid the unfamiliar and prolonged downturn. A key strategic focus is engaging Chinese retail and institutional investors, with the potential to unlock long-term thematic investment.

For China, it is clearer what's in it for them. Hong Kong and Mainland China aim to strengthen their status as financial hubs for global capital. Dual listings, ETFs, and reciprocal exchange memberships offer pathways into economically aligned environments, while also encouraging Saudi capital to flow in the opposite direction.

It's also important to note that global EM benchmarks remain a point of contention for national exchanges due to their outsized influence on global flow of funds across developing markets. This affects both passive and active investors, as deviating from the benchmark can risk underperformance. In extreme cases, a very low benchmark weighting for an EM-classified country can effectively deter FDI and portfolio investment. For Saudi Arabia, the largest Middle Eastern market in EM indices, attracting new capital flows is timely and strategic, potentially positioning it to surpass Brazil as the fifth-largest EM market.

Questions to ask

1. ETF creation and redemption can create a lot of trading opportunities in the underlying market. Do you foresee such activity to become a significant part of overall turnover? 

2. Is there an expectation that the Chinese government will encourage Chinese retail and institutional investors, and not just SWF flows, to invest in Saudi Arabian equities?

3. There are both positive and negative arguments related to the huge number of Saudi IPOs over the last 12 months and their impact on the market from a trading perspective. Can you give us an indication of what you think the impact has been?