How U.S. Liquidity is Being Redefined Amid Structural Shifts

As 2025 approaches its final quarter, U.S. markets grapple with a complex interplay of cyclical pressures and structural transformations. The Federal Reserve's unpredictable stance, combined with tariff volatility and stubborn inflation, has created a fog of uncertainty. This environment has directly impacted trading liquidity, compressing spreads and altering volume patterns.

Off-exchange venues now dominate order flow, while average trade sizes continue their precipitous decline—a trend that has fundamentally reshaped liquidity sourcing. Market makers and high-frequency traders capitalize on these conditions, accounting for nearly half of all consolidated volume.

The summer brought temporary respite with lower correlations and subdued volatility, but the broader trajectory remains clear. Automated trading systems, originally designed for block trades, have paradoxically become the preferred execution venues for smaller transactions. This inversion highlights the depth of market structure evolution underway.