The vast majority of European traders has observed a shift from active towards passive investing. In a survey conducted by SIX Swiss Exchange, over 88% of respondents have confirmed this development - and 72% expect this shift to continue. Traders also voiced a very homogenous opinion of the resulting effects. A staggering 85% believe that a further rise in passive investing could provoke changes in global markets.
Lack of liquidity and risk to price formation?
A major issue identified by 74% of traders was the lack of liquidity in global markets. The fixed income sector stood out with 34% citing liquidity issues, followed by the equities sector (26%). Furthermore, 44% of traders raised concerns that there is a risk to price formation from current levels of trading in passive strategies. As main drivers of passive investing, traders identified cost-efficiency (44%) followed by the looming introduction of the MiFID II regulation in January 2018 (31%).
Regulation remains a challenge
The biggest challenge facing traders in the next 12 months is regulation, highlighted by 73% of respondents, far higher than the 55% who named regulation as their top concern in the last survey of SIX Swiss Exchange. The actions of the European Central Bank were named by 46% of traders as being the most important factor driving trading activity next year followed by "MiFID III" (24%), Trump (16%) and Brexit (11%).
SIX Swiss Exchange has conducted the SIX Trader Survey between 26 October and 8 November 2017, with 185 respondents from across Europe. The previous survey conducted in April 2017 had focused on block trading and gathered 135 responses. Further surveys shall be conducted in 2018.
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