During the period of unprecedented volatility amid the pandemic crisis, investors and traders (even those which trade large blocks of financial instruments or usually value pre-trade transparency waivers) are pushing an increasing amount of their activity onto lit venues. In other words, on to trading venues which have a high level of pre-trade transparency. This is an outcome that will please EU regulators, but probably has not occurred for the reasons they had hoped and may have unintended consequences.

The most revealing quote in this article is from Peter Sleep, senior portfolio manager at a fund manager, who said that during a crisis, traders go to the most transparent and widely used marketplaces, and their execution criteria focus on liquidity (rather than cost).

In other words, traders and investors will need to: (a) rely more heavily on order and execution management systems to avoid "showing their hands" to other market participants; (b) maintain higher levels of margin with brokers, who in turn may need to post more with the CCPs; (c) increase their surveillance of fast-moving and above-normal market activity; and (d) turn to other methodologies to establish how/when/against what price to benchmark any products.

When markets return more to "normal" (or when the new paradigm becomes the "new normal") traders and investors may well recall that there are other, just as important, execution factors (be it speed, cost, "not showing ones hand" or another factor) and revert to the old ways. That decision may be forced on them if, for example, their strategies cannot be fulfilled by the products on the venues or without an alternative in the event that they cannot short certain instruments.

The move to "safe" transparent markets is understandable at this time, but perhaps we should be sanguine about believing that this is a long-term move back onto completely lit markets.