News - Traders concerned with growth of passive investing
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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