Unaddressable letters to Santa may not find their rightful destination. Fortunately, with a flying sleigh, few destinations are inaccessible. Especially using Santa-Nav.
Imagine, however, if around a third of the destinations on the virtual map didn’t exist when you got there?
In equity markets, the task of identifying the difference between addressable and accessible, and what isn’t, is becoming an increasingly significant challenge. Here at big xyt, when we apply our filters to remove non price-forming trades and other inaccessible volume we see around €30bn of volume removed from the fingertips of your algos compared to total reported volumes.
This means that around 30% of European equity turnover becomes invisible when you expect to trade with it. Imagine if one in three of your presents were empty when you opened the box! By the way, when we started applying this adjustment in 2017 this number was only 8% of the total and has been growing steadily since, as the chart shows.
Understanding liquidity within a complex and competitive landscape is of utmost importance for market participants, as it forms the foundation for both pre-trade and post-trade analysis.
Let’s hope that the changes coming to the RTS 1&2 flags during Q1 2024 can help to bring more clarity. Our team will be watching with interest and applying relevant adjustments to present maximum transparency to the community.
Like Father Christmas it helps when we Noël in advance that our (liquidity) map is genuine.
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