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Liquidnet’s latest report examines the liquidity landscape Year to Q3. According to the report, there seems to be three characteristics that define the trends of volume in the market so far this year, none of which are good for liquidity or cost to trade:
- First, traditional HFT taking advantage of rising spreads and rising volatility
- Second trend is the return of performance and the secular trend that retail will follow
- The third trend is the Systematic/Quant flows driven off factor strategies
The report finds that these conditions lead to a “pick your poison” type of backdrop as institutional traders grapple with their daily job of getting in and out of positions. The three conditions have equated to less-than-ideal trading conditions across sectors and market caps. While global liquidity around the world tightens around rising rates, the symptomatic conditions have created a significant drying of liquidity from an institutional equity perspective as well.
