One of the main stage panels at this year's TradeTech addressed the increasingly complex dynamics shaping liquidity formation in European equity markets, examining the challenges and opportunities arising from shifting execution models and market fragmentation.
Titled “Examining liquidity dynamics: What does the growth of bilateral streaming models, SIs and trading at the close mean for price formation and lit-continuous trading?”, the session examined how shifts in execution models and market structure are redefining the role of exchanges and challenging long-standing assumptions about transparency and price discovery.
Moderated by Annabel Smith from The TRADE, the discussion brought forward diverse perspectives on how trading venues, systematic internalisers and alternative liquidity models are reshaping equity in Europe.
Euronext’s Vincent Boquillon, Head of Equity Trading, took part in the panel alongside other experts and offered valuable perspectives on how exchanges can navigate these changes. Read on for highlights of the panel and further insights from Vincent Boquillon to learn how Euronext is balancing innovation with the need for transparency, ensuring market quality amid growing fragmentation and safeguarding fair and efficient price formation.
Balancing transparency and flexibility in a fragmented market
In the panel, Vincent Boquillon emphasised the crucial role of preserving a strong lit and primary market infrastructure amid growing fragmentation. “Price discovery depends on a shared, transparent foundation,” he explained. “When bilateral trading grows in a space that lacks harmonised rules, transparency or even consistent data, it becomes very difficult for the wider investment community to navigate and evaluate liquidity.”
He pointed out that while bilateral trading models offer flexibility, they can sometimes operate in a ‘black box’ that limits clarity for broader market participants. This lack of visibility, especially compared to regulated and transparent lit markets, complicates how investors assess trading costs, execution quality and market depth.
Adapting to fragmentation
The panel also addressed the challenges lit markets are facing, accelerated by technological advancements and the rise of alternative trading models. Vincent Boquillon made it clear that Euronext is not standing still in the face of these changes. “We need to preserve the integrity of public markets,” he said. “Bilateral models, when implemented in equities without safeguards, risk undermining the public reference price, which is critical for the entire economy.”
He also stressed that the key to navigating these shifts lies in fostering competition among liquidity providers and ensuring technological access is equitable across models. “It’s not just about exchanges versus bilateral platforms. The market needs healthy competition within each model to thrive,” he explained.
AVD and auction innovation
As liquidity continues to concentrate around the market close, Vincent Boquillon introduced Euronext’s forthcoming Auction Volume Discovery (AVD) order type. “It’s been over a decade since we’ve seen true innovation in the auction space,” Vincent Boquillon remarked. “AVD is a fully integrated, non-disclosed order type that enables interaction with the auction imbalance, without impacting price formation or leaking information.”
Designed in close consultation with buy-side institutions, the AVD order type aims to enhance liquidity at the open and close while maintaining the integrity of these crucial market events. “Our goal is to protect the integrity of the closing price as a benchmark, while allowing for greater interaction and block execution opportunities,” he noted.
A shared responsibility for market health
Vincent Boquillon’s contributions stressed the importance of protecting transparent, multilateral marketplaces. He highlighted that the integrity of public markets is a collective responsibility, extending beyond exchanges to all industry participants.
Through continued innovation and a commitment to maintaining fair and orderly markets, Euronext is playing a key role in shaping the future of equity liquidity in Europe.
For more insights on Euronext’s upcoming Auction Volume Discovery order type and its role in enhancing closing auction liquidity, watch Vincent Boquillon’s recent interview with The TRADE.
