In our Business Plan 2019/20, we noted that we track the proportions of trades carried out on venues with varying levels of trade disclosure.
This follows key reforms introduced through MiFID II including increased trade transparency which have changed the trading landscape. As the graph below shows:
- The UK’s market structure offers different levels of trade transparency to meet the varying execution needs of market participants.
- The structure of the market was relatively stable during the year until markets were impacted by the coronavirus crisis. While trading on auctions, systematic internalisers, and dark trading all picked up in March, lit venues saw the biggest increase, as participants sought certainty of execution.
Chart tips: hover over data series to view the data values and filter the data categories by clicking on the legend.
Liquidity in different markets may vary over time for many reasons. While we do not aim to promote any particular level of liquidity, levels of liquidity are something we monitor. In our Business Plan 2019/20, we undertook to report on summary data on liquidity. However, this is not an outcome measure.
In normal conditions, trade volume is one indicator of an asset’s level of liquidity. As shown in the graph below, turnover in UK equities and liquid, investment grade, sterling-denominated corporate bonds was relatively stable from the beginning of 2019 until the start of 2020. Equity trading volumes rose sharply in late February, driven by coronavirus developments, while bond trading volumes increased in January, before falling back slightly towards the end of the quarter. At the same time, we saw an increase in equity and bond bid-ask spreads in the second half of the first quarter of 2020, amidst elevated uncertainty and volatility in the market.