Growth of off-exchange ETF trading and ETF RFQ networks

Key Takeaways

• ETF trading continues to gain ground globally, driven by both retail demand and institutional adoption
• A large share of ETF trading happens off-exchange (OTC or RFQ), as institutions favor it for better pricing and execution
• RFQ networks are increasingly key to ETF markets in Europe and North America due to their operational and tech advantages

Global ETF trading seems unstoppable. In 2024, global assets under management in ETFs surged by 27 percent to reach $14.6 trillion. Analysts at EY forecast that the global ETF market will grow at an annual rate of 15 percent, reaching $25 trillion by 2030, with European assets expected to rise to $4.5 trillion. According to Brown Brothers Harriman survey findings, 95 percent of investors are planning to increase their ETF allocations in the next year, up from 82 percent in 2024.

Why institutions prefer off-exchange ETF trading

ETFs appeal to a broad spectrum of investors due to their intraday liquidity, daily portfolio transparency, and straightforward access to diversified exposure. For retail investors, they offer a simple, low-cost way to build diversified portfolios, while institutional traders often turn to ETFs as tools for efficient hedging, cash management, or market exposure.

As both retail and institutional demand grows, equity trading desks at major global banks are seeing an increasing share of their flow shift to ETFs, particularly in block-size trades.

Yet despite their appeal, ETFs can pose trading challenges, since accessing liquidity often depends on the liquidity of the underlying securities that make up the fund. This makes price discovery harder for large orders and can lead to less efficient execution.

As a result, institutions increasingly turn to execution strategies that offer greater flexibility and access to deeper, often less visible, pools of liquidity.

Off-exchange on the rise

A growing share of ETF trading now takes place off-exchange – particularly via over-the-counter (OTC) and RFQ (Request for Quote) platforms – which can help institutions manage execution risk and access deeper liquidity.

ETF trading practices vary significantly by geography, with off-exchange activity far more prevalent in Europe than in the US.

In Europe, over 70 percent of ETF trades are executed off-exchange, either via RFQ platforms or OTC methods. Part of the reason investors are steering away from traditional exchanges is the fragmented nature of the European market, where liquidity is scattered across multiple national exchanges and regulatory regimes. On-exchange trading is further limited by the absence of a consolidated tape in Europe – currently in the making – which would provide a unified view of transactions across markets and improve transparency.

In contrast, in the US,  on-exchange ETF trading is still dominant, supported by a system for consolidating trade and quote data across exchanges and greater overall market liquidity. That said, a gradual shift toward off-exchange execution is underway, especially for larger trades, as sophisticated trading firms increasingly favor alternative venues to better manage spreads and minimize market impact.

A helping hand: RFQs streamline ETF trading, improve execution quality

RFQ is a method used by investors to obtain indicative or firm prices for financial instruments directly from market makers – typically banks or brokers. In off-exchange ETF trading, RFQs play a key role by facilitating bilateral negotiations, enabling investors to secure competitive pricing, better liquidity, and greater execution certainty compared to traditional exchange-based transactions.

RFQ platforms, such as those offered by Tradeweb and Bloomberg, are playing an increasingly central role in the ETF ecosystem. These dedicated electronic trading networks combine operational flexibility with technological sophistication, making them particularly appealing to institutional investors on both sides of the Atlantic. Off-exchange trading – whether OTC or via RFQ – grants investors greater control over execution. Disclosure requirements are generally less stringent than on lit exchanges, and the ability to negotiate directly with liquidity providers allows for more tailored pricing, especially on large or sensitive orders.

RFQ networks are often integrated directly into institutional execution systems, enabling traders to request and receive real-time quotes from multiple market makers simultaneously. This improves workflow efficiency and gives the buy-side more control over how trades are routed and executed.

These workflow improvements are just one aspect of RFQ networks’ broader impact. They also help address the problem of fragmented and limited liquidity by connecting investors to a broad pool of market makers and authorised participants. This aggregated access improves the chances of securing competitive pricing and reliable execution – particularly important in Europe’s multi-venue trading environment. Many of these electronic platforms also include audit functionality, helping institutions meet their regulatory obligations.

RFQ platforms are gaining ground

As ETF trading shows no signs of slowing, RFQ platforms are emerging as essential infrastructure, powering scale, simplifying complexity, and helping institutions stay ahead of regulatory demands.