Investment Operations

COALITION GREENWICH NAMES TOP MARKET STRUCTURE TRENDS FOR 2023

Buyside Operations

2022 was a year of both transition and preparation:  transition away from a decade’s long low-rate environment, equity bull market and COVID lockdowns; preparation for market structure changes on the back of the March 2020 liquidity crunch and the meme stock craze.

“We are about to see how changes in global market structure and regulation that started to play out in 2022 will impact markets in 2023 and beyond,” says Kevin McPartland, Head of Research in the Coalition Greenwich Market Structure & Technology group.

In a report released this week, Coalition Greenwich examines some of the biggest market structure trends we should be watching in the year ahead. The Top Market Structure Trends to Watch in 2023 include::

  • The Search for the Next Tail Risk: Regulators spent the decade after the Global Financial Crisis implementing rules intended to make markets more resilient to tail risks. Will 2023 put that work to the test?
  • Crypto’s Dot Com Moment and the Flight to Quality: Crypto will emerge from its “dot com” moment a changed industry, with fewer vertically integrated companies and more specialized firms operating with stronger governance and robust risk management. 
  • The Quantification of ESG: ESG will become more systematic and quantitative. Some ESG elements today contain a level of value judgement that can conflict with end investors who want to both support sustainability initiatives and maximize returns. Changing that will require continued refinement and improvement of ESG data. 
  • Electronic Bond Trading’s “What’s Next”: Electronic bond trading will build on an exceptional 2022 with the continued growth of market-changing innovations like direct pricing streams, session-based trading, new tools that allow dealers to find liquidity in their networks, and all-to-all liquidity. 
  • Progress in Equity Market Structure Reform: Bold regulatory proposals affecting almost every facet of the equity trading life cycle will be front and center in 2023 and with a little luck, 2023 is the year we can finally relegate the payment for order flow (PFOF) debate to the dustbin of history.

Among the additional market structure trends covered in the new report are the renewed importance of capital, tokenization, the continued rise of alternative data, increased spending on surveillance technology, and the growth and proliferation of outsourced trading.