Finadium: Liquidity Trends in Listed Equity Derivatives Markets

Use the Current Exposure Method, SA-CCR, or just cut out margin from the Leverage Ratio altogether? Answering this question, and soon, is a core challenge and opportunity for global equity derivatives liquidity today. This Finadium report evaluates listed equity derivatives from the perspective of securities financing, and provides a primer on current conditions for collateral market participants.

Regulation is not the only factor changing market structure: technology is also playing a major role. The adoption of high frequency trading strategies, machine learning, Big Data, and artificial intelligence mean that equity derivatives market participants are in a new sort of arms race. The best consumers of these technologies, especially in a fragmented market, are best able to generate revenues. As market makers leave and technology-driven proprietary trading firms enter, a shift in liquidity provision appears to be underway.

This report documents the impacts of recent regulation and technology change on equity derivatives liquidity in the US and Europe. It assesses volumes, concentrations in underlying products, and transactional activity across indices and single name equity derivatives.

This report should be read by market professionals looking for an overview of the changing equity derivatives liquidity landscape. Equity securities finance market participants will benefit from a greater understanding of the link between equity derivatives trading and current financing trends.

This report is part of the Investor Focus series and the Securities Finance, Collateral and Derivatives series. These research subscribers can log in here to access this report. All others may visit the Finadium reports website for report details.

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