Overview of the European ETF Market

Since the first ETF was listed in Europe in April 2000, the market has grown rapidly in both popularity and scale. As of June 2025, there are more than 3,100 Europe-domiciled ETFs that collectively manage $2.6 trillion in assets—making it the second-largest ETF market in the world behind US-domiciled ETFs, which hold $11.5 trillion.¹ While they share many similarities with their US counterparts, European ETFs exhibit several distinct characteristics. In this article, we take a deep dive into the liquidity of the European ETF market using recent data. Our analysis provides a few important insights about ETF liquidity intraday, over time and cross-sectionally.

In the European market, UCITS ETFs can be traded both on-exchange and off-exchange.² On-exchange refers to traditional stock exchanges, such as the London Stock Exchange, Xetra or Euronext, which are highly transparent, tightly regulated and usually host the primary listing of an ETF. Off-exchange trading includes multilateral trading facilities (MTFs), systematic internalisers (SIs) and over-the-counter (OTC) trades. These venues provide alternative execution channels but generally operate with less transparency compared to regulated exchanges. Due to the ETF structure, which allows an additional layer of liquidity through the creation/redemption mechanism, large block trades are often executed off-exchange through, for example, request-for-quote (RFQ) platforms. Since the European ETF market is dominated by institutional investors, who are more likely to place large orders, off-exchange trading accounts for roughly 70% of total ETF trading volume.³ However, while all ETF trades in the US are reported and published through a consolidated tape, Europe lacks such a unified reporting system. For this reason, in this article we focus only on the on-exchange activities. While this does not capture the full extent of marketwide ETF liquidities and volumes, it still provides valuable insight into the liquidity pattern intraday, over time and across ETFs.

To examine the European market, we compile a comprehensive dataset of tick-by-tick trade and quote data for UCITS ETFs, with each record corresponding to a unique listing of an ETF share class.⁴ We focus on equity and fixed income UCITS ETFs listed in the United Kingdom, Germany, Italy, Switzerland, France and the Netherlands, with fund assets under management (AUM) of at least $100 million as of June 2025. We exclude funds of funds, leveraged funds and inverse/short funds from the sample. The set of ETFs, along with their asset classes and investment styles, is from Morningstar. The intraday tick data is from LSEG. We use this data to compute several key microstructure statistics for the period from January 2024 to June 2025.

Exhibit 1 summarizes key liquidity characteristics of equity and fixed income ETFs across major categories. Within equities, ETFs are split into four categories: US-focused ETFs, Europe-focused ETFs (including pan-European, Eurozone and single-country exposures), Global and Regional ETFs (globally diversified and funds focused on regions outside the US and Europe such as Asia Pacific, Latin America or emerging markets), as well as Sector ETFs. For fixed income, the classification includes US-focused ETFs, Europe-focused ETFs and Global and Emerging Markets fixed income ETFs. In Appendix 1, we also compare the statistics across listing countries.

Bid-Ask Spread

For each ETF listing on each day, we compute the time-weighted average intraday bid-ask spread in basis points (bps). We then take a simple average across all trading days for each ETF listing and take equal-weighted averages across ETF listings. Our analysis shows that US equity and Europe equity ETFs have smaller average spreads (17.3 bps and 15.4 bps, respectively) than Global and Regional equity ETFs (24.8 bps) and Sector equity ETFs (25.6 bps). In the fixed income category, US and Europe ETFs also have narrower spreads (17.0 bps and 14.0 bps, respectively) than Global and Emerging Markets fixed income ETFs (27.7 bps).

Dollar Volume

Trading volume is another important measure for market liquidity. For each ETF listing, we compute the average daily dollar volume across all trading days, then take an equal-weighted average across ETF listings within the same asset class and with the same investment style. Among all groups, US equity ETFs demonstrate the highest average daily volume, followed by US fixed income ETFs and Europe equity ETFs.

Open/Closing Auction Volume

Open and closing auctions are mechanisms used on stock exchanges to determine securities’ opening and closing prices each trading day. For ETFs, open auction and closing auction trades account for 3.3% and 4.5% of the daily total volume, respectively. The closing auction size for ETFs is much smaller than for individual stocks, which is nearly 30% for European common stocks.⁵ In fact, 57% of ETFs regularly see no volume at all in the closing auctions, with fewer than half of their trading days seeing a closing auction trade.

To see how the market microstructure has changed over time, Exhibit 2 presents the time-series plots of the bid-ask spread, dollar volume and open/closing auction volume as a percentage of daily total volume from January 2024 to June 2025. Two notable market events caused significant market movements:

• 5 August 2024: Global equity markets tumbled and volatility spiked.
• 7 April 2025: A spike in volatility followed the announcement of new tariffs by the US president, Donald Trump.

In both cases, the ETF bid-ask spread and dollar volume peaked sharply. For the auction volume, we observe a clear periodic pattern: open auction volume spikes every Monday, while closing auction volume spikes on the last trading day of each month.⁶

Many investors trading ETFs wonder when to place an order to minimise trading costs. Typically, lower trading costs are associated with a tighter bid-ask spread and higher trading volume. To examine how the spread and volume change throughout the day, we compute the intraday bid-ask spread and volume for each 15-minute interval and then take equal-weighted averages across days and ETFs. All times are converted to London time. Exhibit 3 shows the intraday plots of the ETF bid-ask spread and distributions of trading volume. The spread is widest near market open but drops significantly and becomes relatively stable 30 minutes after the open. The wider spread near market open may be due to greater pricing risk for authorized participants (APs) and dealers making markets in an ETF when the underlying securities’ market is incorporating information from overnight. We also observe three noticeable spread blips at 13:30, 14:30 and 15:00 (corresponding to 8:30, 9:30 and 10:00 New York time, respectively), which align with the US macroeconomic data releases and the US stock market open. In contrast, the intraday ETF volume displays a U-shape, with the highest trading volume right after market open, followed by a drop and a relatively stable period until noon before picking up again around 13:30, when US macroeconomic data is released. The period from 14:30 to 16:30 tends to be the most liquid trading window for ETFs, as it overlaps with US market trading hours.

Europe is the world’s second-largest ETF market, behind the United States. Unlike mutual funds, ETFs offer investors the ability to trade in the open market during market hours; therefore, understanding ETF liquidity can help investors achieve better trading outcomes. Although approximately 70% of trading in this market occurs off-exchange due to the high participation of institutional investors, analyzing on-exchange activity still provides valuable insights. Our analysis of the UCITS ETF trading on the exchanges highlights how volumes and bid-ask spreads vary across asset classes and investment styles, as well as how they change throughout the day and over time.