European volumes are closer to the US than they appear.
A widely held belief in global finance is that the US equity market reigns supreme in terms of liquidity, surpassing other markets by a wide margin. By contrast, European markets are often viewed as secondary. However, upon closer examination of equity flows in both regions, and taking into account the complexity associated with the concept of liquidity, the presumed dominance of the US in equity liquidity is not as clearcut as it might seem.
Executive summary
- At aggregate level, the Average Daily Value Traded (ADVT) in US looks 4.4x higher than in Europe (€288bn vs €65bn in 2023) combining all companies above €250m market cap.
- However, the liquidity gap is driven mainly by the 79 Mega-Capitalisation stocks in the US which account for over 50% of US turnover, while Europe has only 20 Mega-Caps listed.
- When measuring the value traded relatively to the different market capitalisation segments, the ADVT per single company yields interesting results:
- Average Large-Cap stock has ADVT of €146m in US vs €116m in Europe (only 1.3x gap)
- Average Mid-Cap stock has ADVT of €23m in US vs €12m in Europe (only 2.0x gap) - Turnover Velocity metrics (value traded divided by market capitalization) also confirm the robust liquidity in Europe compared to the US.
Methodology
- Market capitalisation segments are categorised as follows:
- Small-Caps: €250m ≤ market capitalisation < €1bn
- Mid-Caps: €1bn ≤ market capitalisation < €5bn
- Large-Caps: €5bn ≤ market capitalisation < €100bn
- Mega-Caps: €100bn ≤ market capitalisation - Market capitalisation data is sourced from independent data provider Bloomberg.
- Market capitalisation data is the average total market cap (not the free-float market cap) for the year 2023 from Bloomberg using the following formula: BDH (Company Ticker, "CUR_MKT_CAP", "1/1/2023", "12/31/2023", "Currency", "EUR", "Period", "CY").
- Turnover data is taken from 1 January 2023 to 31 December 2023.
- Turnover data is sourced from independent provider BMLL Technologies, and is aggregated to cover all value traded in 2023. This data includes On-Book, Off-book, On-exchange, OTC, SI, Dark and Auctions turnover.
- In this study, ‘Europe’ is understood to mean the companies listed on the following European markets: all Euronext Markets (Amsterdam, Brussels, Dublin, Lisbon, Milan, Oslo, Paris); Deutsche Börse; Bolsas y Mercados Españoles; Nasdaq Nordic (Stockholm, Helsinki, Copenhagen); London Stock Exchange. The ‘US’ is understood to mean the companies listed on the following US markets: Nasdaq; New York Stock Exchange.
- All data has been harmonised to € to provide a relevant comparison.
Download Equity Liquidity Analysis - Demystifying the liquidity gap between European and US equities
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