Liquidity Landscape Q3, November 10, 2020

Despite lockdown measures being lifted progressively over the summer and governments making every attempt to re-start their respective economies, Top of Book Liquidity ^* has not returned to pre-Covid levels for the UK Top 100 and EU STOXX 600 trading respectively 32% and 30% lower than the January average, whereas Australia and Japan is now higher than pre-Covid levels. There has been little change in US TOB liquidity.

Market Impact

The cost of trading remains higher than January levels across all markets, however, the reason why the cost of trading has not recovered to pre-Covid levels vary from one market to another. Higher volumes and wider spreads in Australia appear directly responsible for maintaining the cost of trading 38% higher in October compared to January while for the UK and Europe, the lack of liquidity resulted in the cost of trading still being respectively 45% and 46% higher than January. Wider spreads in the US may be the cause of the rise in costs there.

^{Source: Liquidnet Internal Data}

^{* As represented by the median number of shares at the top of the book proxied against the January average}

The report has been compiled by Rebecca Healey and Charlotte Decuyper, Liquidnet’s Regulatory Consultants, Gareth Exton and Joe Fields from Liquidnet's Execution & Quantitative Services team.