PRESS RELEASE

WFE warns that too much bilateral trading weakens price formation and investor protection


London, 5 November 2026 –  The World Federation of Exchanges (WFE), the global industry association for exchanges and central counterparties (CCPs), today called for greater attention to the role of exchanges in investor protection as trading becomes increasingly fragmented across very different types of trade execution. 

In two new papers, To Serve and Protect and When is Liquidity?, the WFE sets out why investor protection depends on good market design, which makes it possible to enforce the crucial rules that apply to financial intermediaries. 

The papers look particularly at the effect of trading moving away from multilateral markets towards bilateral execution, and the implications for liquidity and price formation.  

The WFE says policymakers need to look beyond headline trading volumes and consider how much liquidity is genuinely available to investors and whether this fragmentation is affecting the robust price formation that is essential for public confidence. 

The When is Liquidity? paper shows how headline volumes can give a misleading picture of the liquidity available at any given point in the trading day. Multilateral exchanges bring participants together, reduce the cost of finding a counterparty and support transparent price discovery. 

Fragmentation can make it harder for market makers to manage the risks of providing liquidity. They may be undermined by non-public, bilateral trading and phantom liquidity when providing prices on-exchange – a process which can ultimately reduce the liquidity available to investors and weaken price formation. 

This matters for best execution. If it is difficult to establish where liquidity is genuinely available, it becomes harder to determine what the best possible execution price is. The WFE says policymakers should therefore consider how market design can serve investors, focusing on market depth on multilateral markets at any given point in time rather total trading volume. 

The papers also consider newer types of markets and assets, including crypto, prediction markets and carbon credits. The WFE says markets offering new ways of trading or new types of assets should be able to demonstrate how they support investor protection and meet the standards expected of regulated exchanges. 

Richard Metcalfe, Head of Regulatory Affairs at the WFE, said: “Investor protection starts with good market design. Exchanges provide the structure in which prices are formed, trading is governed by clear rules and market activity can be monitored. 

“As more trading moves into bilateral markets, we need to be clear about what that means for liquidity and price formation. If liquidity is not genuinely available, it becomes harder to know what the best execution price really is. That is a market structure issue, not simply a question of where an individual trade takes place.” 

Nandini Sukumar, Chief Executive Officer of the WFE, said: “Exchanges provide an important public reference point for financial markets. They help investors understand where prices are being formed and give companies a trusted market in which to raise capital. 

“Innovation has an important place in financial markets, but new forms of trading should not mean lower standards for investors. If a market is providing a different route to trading, it should be able to demonstrate that it provides the same level of investor protection and market integrity.”


For more information, please contact:

Oonagh Shiel
Communications Manager
Email: communications@world-exchanges.org


About the World Federation of Exchanges (WFE):

Established in 1961, the WFE is the global industry association for exchanges and clearing houses. Headquartered in London, it represents the providers of over 250 pieces of market infrastructure, including standalone CCPs that are not part of exchange groups. Of our members, 39% are in Asia Pacific, 41% in EMEA and 19% in the Americas region. The WFE’s 74 member CCPs and clearing services collectively ensure that risk takers post some USD 1.4 trillion (equivalent) of resources to back their positions, in the form of initial margin and default fund requirements. WFE exchanges are home to over 41,000 listed companies, and the market capitalization of these entities is over $137 trillion; around $198.5 trillion in trading annually passes through WFE members (at end-2025). 

The WFE is the definitive source for exchange-traded statistics and publishes over 350 market data indicators. Its free statistics database stretches back 50 years and provides information and insight into developments on global exchanges. The WFE works with standard-setters, policy makers, regulators and government organisations around the world to support and promote the development of fair, transparent, stable and efficient markets. The WFE shares regulatory authorities’ goals of ensuring the safety and soundness of the global financial system. 

With extensive experience of developing and enforcing high standards of conduct, the WFE and its members support an orderly, secure, fair and transparent environment for investors; for companies that raise capital; and for all who deal with financial risk. We seek outcomes that maximise the common good, consumer confidence and economic growth. And we engage with policymakers and regulators in an open, collaborative way, reflecting the central, public role that exchanges and CCPs play in a globally integrated financial system. If you have any further questions, or wish to follow-up on our contribution, the WFE remains at your disposal. [1] 

Website: www.world-exchanges.org

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[1] Our EU Transparency Register number is 973382524675-69


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For more information, please contact:

Oonagh Shiel
Manager, Communications
Email: [email protected]
Twitter: @TheWFE