With just a few weeks to go before the big day, the elves in Santa’s navigation department are working hard on the present delivery plan. Using AI and historical data from previous years, with nanosecond granularity, they will figure out which towns to visit, in what order and how fast. They will use key metrics such as the Nice/Naughty concentration ratio, Believe/Not Sure spreads and the Chimney Accessibility criterion (based on the probability of Santa getting stuck). Those houses that meet the tests are determined to be “Addressable” and they go on the list.
At xyt we do a lot of work on Addressability too but in relation to pools of liquidity. Today’s chart shows the aggregate values for all trades in 2025 categorised according to their corresponding type of liquidity pool (auctions, continuous trading, off book etc). While headline ADVT figures (left hand chart) in Europe are ~€93bn per day, this routinely overstates the magnitude of liquidity available to investors by as much as €23bn. According to our analysis, this is 32% higher than should be relied upon for estimating trading costs and for investment decisions. We refer to this more precise notion as Addressable Liquidity (shown in the right hand chart).
Notice how trading on electronic ‘multilateral’ venues (blue shades), that represents a consistent €46bn per day is not subject to any differences, reflecting how reporting is systematic, automated and where categorisation is simple. The discrepancy is seen in the difference between ‘Off Order Book’ trading (red shades) with €47bn per day in the left chart but just €23bn in the right chart. Here, technical trades that are not price forming and not available for interaction with other market participants are filtered out. The main conclusion from this chart is that electronically executed trades on Exchanges and MTFs in continuous and auction trading account for 66% of daily value traded, a striking difference from the 49.5% seen in the headline number.
Even after this adjustment, Off Order Book trading contains a wide variation of different types of ‘bi-lateral’ trading mechanisms that are not always accessible to an investor and as transparent as the Order Books. It is vital for a firm to keep track of the distribution of their trading activity between liquidity pools versus the overall market landscape on a regular basis to ensure it is efficiently capturing all available liquidity.
Use of correct liquidity categorisation and measurement is crucial for both trading and investment decisions as it affects estimates of a portfolio’s tolerance to inflows, outflows and major events, not to mention risk management. If you are interested in the definition of these categories and how they relate to the investing and trading process, please look out for our forthcoming “Liquidity Matters” series which breaks down the differences in detail.
