The landscape for cash equities trading is evolving, with both Europe and the US experiencing significant growth in bilateral trading. This shift is driven by the desire for greater flexibility, cost-efficiency and more tailored liquidity solutions. As a complement to their existing execution strategies, buy-side clients and brokers alike are increasingly looking for direct liquidity from Systematic Internalisers (SIs) in Europe and Single Dealer Platforms (SDPs) in the US.
At Reactive Markets, we are facilitating this evolution by providing technology and infrastructure that seamlessly aggregates and provides access to bilateral liquidity across these diverse sources. Our platform empowers clients to tap into multiple liquidity venues, and integrates frictionlessly into their existing workflows.
In Europe, Systematic Internalisers (SIs) have emerged as a key component of the post-MiFID II trading landscape. SIs provide direct liquidity to both buy-side clients and brokers, offering them the opportunity to engage in bilateral trades in a regulated, yet flexible, environment.
For institutional investors, SIs offer the benefit of tailored liquidity solutions, enabling them to source liquidity that fits their specific execution needs. Brokers, on the other hand, are using SIs to enhance their own offerings, providing their clients with access to deeper liquidity pools and more competitive pricing options without sacrificing control over the execution process.
In the US, Single Dealer Platforms (SDPs) are playing a similar role. SDPs allow buy-side institutions to trade directly with liquidity providers, bypassing the need for intermediaries in certain situations, while complementing traditional execution venues.
For both buy-side clients and brokers, SDPs provide an additional source of competitive pricing and liquidity. Rather than replacing exchanges or other traditional trading venues, SDPs offer a way to access customised liquidity solutions that can work in conjunction with their existing strategies. The flexibility offered by SDPs is increasingly becoming a core part of an effective multi-venue trading approach.
Bilateral trading enables both buy-side clients and brokers to optimise their execution strategies. By interacting directly with liquidity providers through SIs and SDPs, they can access pricing that is tailored to their specific needs. The flexibility of these venues allows them to reduce trading costs, manage execution risk and improve overall trade performance.
For institutional investors, leveraging bilateral liquidity means they can selectively choose liquidity sources based on their trade size, urgency or market conditions. They can avoid the price slippage that might occur on a lit venue and optimise their trading strategy by tapping into deeper, more bespoke liquidity pools.
Brokers also stand to benefit from bilateral liquidity. By integrating with multiple liquidity venues such as SIs and SDPs, brokers can offer their clients a broader range of execution choices. This helps them remain competitive, providing more flexible solutions for their clients while ensuring that they access the best available pricing across venues.
While bilateral liquidity presents significant advantages, it also introduces complexity. The liquidity is spread across multiple SIs and SDPs, creating a fragmented market, and the need to aggregate and simplify huge volumes of market data. This is where Reactive Markets provides an important solution. Our technology was originally developed for the volumes of today’s FX markets; it can capture and process millions of messages per second. This means our platform can aggregate pricing feeds from a wide range of liquidity providers, consolidating them into a single, unified view for our clients.
For both buy-side institutions and brokers, this aggregation of liquidity sources simplifies the trading process. Instead of needing to connect to multiple venues individually, clients can access all the liquidity they need through one platform. Reactive Markets delivers low-latency, tradeable market data from SIs and SDPs, aiming to ensure that clients can execute at the best available prices with ease.
One of the core strengths of the Reactive Markets platform is its ability to integrate effortlessly into existing workflows. Both buy-side clients and brokers rely on Execution Management Systems (EMS) to manage their trading operations. Our platform connects directly to all major EMS providers, allowing clients to access bilateral liquidity without disrupting their current processes.
This seamless integration ensures that clients can benefit from the liquidity available across multiple SIs and SDPs without needing to overhaul their infrastructure. For brokers, this means they can deliver new bilateral trading opportunities to their clients while maintaining operational efficiency.
It's important to note that bilateral trading is not about disintermediating exchanges or eliminating traditional trading venues. Rather, it serves as a complementary channel that allows both buy-side clients and brokers to access additional sources of liquidity that suit their specific needs. Whether used in conjunction with exchange-based trading or other liquidity pools, SIs and SDPs offer new ways to optimise execution strategies.
At Reactive Markets, we’re enabling clients to leverage this bilateral liquidity as part of a broader execution strategy, ensuring that they have access to the deepest and most diverse liquidity pools across asset classes.
As bilateral trading continues to grow, we expect to see increasing adoption of SIs and SDPs by both buy-side clients and brokers. The technology underpinning these markets is becoming more advanced, allowing for straightforward integration and real-time access to liquidity. At the same time, regulatory frameworks in both Europe and the US are evolving to support greater market flexibility and innovation.
Reactive Markets is well-positioned to lead this transformation, providing infrastructure that allows clients to access and aggregate liquidity from multiple venues in real time. As we look to the future, we anticipate continued growth in bilateral trading and the continued expansion of liquidity solutions that meet the needs of modern institutional traders.
Bilateral trading in cash equities offers a unique opportunity for both buy-side clients and brokers to optimise their execution strategies and offerings. By accessing liquidity through SIs and SDPs, they can benefit from competitive pricing, deeper liquidity pools and more flexible trading options.
At Reactive Markets, we are at the forefront of this market shift, providing the technology that enables clients to access, aggregate and integrate bilateral liquidity into their existing workflows. As the landscape continues to evolve, Reactive Markets will deliver the technology needed to capitalise on the growing opportunities in bilateral markets.
