Brexit: Liquidity shifts post transition period

After a difficult 12 months, Brexit finally happened. However, the equivalence many hoped for was not granted to UK finance companies. This article looks at how the liquidity landscape is changing and how ION Markets helped its clients overcome the transition.

On the first trading day of the year, European client volume was expected to switch over to the newly established European MTFs where possible. However, much of the volume headed firmly towards the primary exchanges.

This trend reversed steadily over the week. One explanation for this could be down to the configuration of smart order routers (SORs). Most SORs place liquidity onto markets according to previous average daily volume figures, and the newly created European MTFs were light on historical data. This movement of volume towards the European MTFs is expected to continue over the next few weeks, as the trading landscape settles and finds its equilibrium.

The Fidessa platform’s success across Europe in handling this transition period has been mainly due to careful planning across the previous two years by our clients and ION Markets teams, and the platform’s ability to easily handle complex workflows around different trading entities.

Like all good planning, last-minute changes are often required. As it became clear that the European Union would not grant equivalence, ION Markets handled a raft of last-minute requests from customers to enhance their systems’ configuration. These often complex changes were successfully rolled out across all platforms just days before the transition period came to an end.

With the UK now split away from Europe and the spectre of regulatory divergence now more likely than ever, platforms’ capability to be multi-jurisdiction and multi-entity will be even more critical going forward.