Coalition Greenwich: The Top 10 Financial Trading Trends of 2025

Source: Coalition Greenwich; Compiler: Tao Zhu, Golden Finance

The year ahead is arguably the most unpredictable year. Geopolitics are complex and US regulatory policies are uncertain. While the U.S. stock market can’t seem to stop rising and interest rates can only fall, we know that neither of those things is a sure thing.

Thankfully, some trends are still ubiquitous: electronic trading, a focus on workflow automation, increasing market transparency, and of course, artificial intelligence and machine learning (AI/ML). While we didn't explicitly include it on our list, the impact of AI/ML will be felt in nearly every trend we'll be watching in 2025. It is and will continue to be a huge catalyst for innovation in financial markets in the coming years. With that in mind, here are the trends our team will be watching in 2025:

1. The influence of the ETF market further expands

ETFs have become the smartphones of the market—they can do almost anything. Every year, more stock and corporate bond investments are moved from mutual funds into ETFs, and that's inevitable. It stands to reason that institutions will use these ETFs as cash management/liquidity/hedging tools.

But asset managers and owners have now discovered that ETFs are excellent distribution vehicles for just about everything: private credit, Bitcoin, Ethereum, CLOs, money markets, municipal bonds, U.S. Treasury bills — the list keeps getting longer. Of course, there is definitely some confusion and some solutions are looking for problems. But if managers own assets that need investors (such as private credit), carefully constructed ETFs in model portfolios can provide access to entirely new pools of capital more easily than traditional methods.

Most retail investors don't need to add more "alternative investments" to their investment accounts; institutional investors already have access to them. But improved access (and liquidity) to the full range of investable assets would be a good thing for both institutional and (qualified) retail investors.

2. “Smarter, faster”

To become a top market maker, you still need to be faster than everyone else. Microwave, shortwave or satellite connections are required to transmit market data and orders around the world at (nearly) the speed of light. If you are the fastest and first to the market, your trading logic does not need to be unique to make money. But over the past five years, the number of such companies has shrunk dramatically as data and transaction links defy the laws of physics.

For others, the focus now is on getting smarter, fast enough. Of course, smarter is subjective. In practical terms, combining the most creative people with as much computing power as possible is what major trading firms and hedge funds do. Speed ​​still matters, and the bar is getting higher. But now, running a successful quant strategy is all about uncovering unique correlations and market anomalies through predictive AI operating at hyperscale, and capturing profits before anyone else has a chance to figure out what you did.

3. Matching buyers and sellers becomes more efficient (and complex)

Major stock markets, U.S. Treasuries, foreign exchange, and increasingly investment-grade corporate bonds (among others) are traded electronically. While our research shows that electronic trading will continue to grow, the pace of change will slow to varying degrees as each market matures. Maturity does not mean a lack of progress, however. The past and present tell us that the future will be filled with continued innovation in electronic transactions. While innovation will not always increase electronic trading volume, it will make trading more automated, efficient and productive for investors and traders.

A new alternative trading system (ATS) for stocks shows that even one of the world's most electronic markets has new tricks up its sleeve. The U.S. Treasury market has declared victory over electronic trading and is beginning to take on more complex challenges. The growth in electronic trading of corporate bonds is not coming from more RFQ volumes, but from all-to-all protocols, portfolio trading and modern auctions. The result is a more liquid market.

Technology does not create liquidity, but it does tap liquidity that would otherwise be unavailable. These solutions are often very complex at their core, but thanks to EMS, UI designers, and algorithms, traders can only see the magic and have no idea of ​​the complexity that creates this.

4. The pressure exerted by the upstarts on the incumbents is ruthless

The idea of ​​startups disrupting existing businesses is as old as the businesses themselves and has always existed in the capital markets. In our top market structure trends to watch in 2022, we note that pandemic-era startups are coming out of stealth mode and preparing to deliver solutions for a transformed world. For companies that have weathered a difficult market cycle in 2022, the results of these efforts are increasingly evident.

ATS are eroding floor market share, non-bank market makers are taking market share (and customers) from the big banks, and capital markets fintechs are doing both of these things and more. These agile newcomers are leveraging cutting-edge technologies, innovative business models and customer-centric approaches without being hampered by legacy technology and operational complexities.

But remember – existing businesses are existing businesses for a reason. Their size and experience often keep them ahead of the curve, even if they can't be as nimble. Of course, they can and often do acquire these innovative start- ups. Who's the big winner? No matter who wins, customers will see better prices and products.

5. U.S. regulations are becoming more unpredictable

The only certainties are death and taxes—well, maybe just death. While many people think they know what will happen in capital markets under a new Trump administration, few actually know. We agree with several assumptions: Many of the SEC’s proposed but failed rules will expire or be rewritten; Treasury and repo liquidations will fall into the latter category, at least with delayed implementation timelines; Crypto markets will be subject to more relaxed regulations regulation and gain regulatory clarity; many pending cases against the SEC will be dismissed or won by plaintiffs.

The Republican victory isn't the only regulatory change affecting the securities industry. The U.S. Supreme Court's Chevron ruling reduces the court's deference to administrative agencies and could trigger a new round of challenges to rulemaking by the U.S. Securities and Exchange Commission, the Commodity Futures Trading Commission and other financial regulators on everything from ESG to digital assets to the future of event contracts. Increased court scrutiny of SEC actions could lead to further challenges, particularly to some of the SEC's latest rules.

6. Derivatives market transactions and innovation continue to be booming

The demand for derivatives seems insatiable. Traditional futures contracts tracking interest rates and stock markets set trading volume records in 2024. The event contract became official in the United States and saw a surge in trading volume ahead of the election. Bitcoin and ETH futures trading volumes have grown, stock options have become mainstream, and 0DTE contracts have driven trading volumes up further. There will only be more to come.

Institutional traders and investors will always drive the majority of market volume, but the full entry of retail investors into the futures market is notable. More crypto-related ETFs will lead to increased trading volume in crypto ETF options. Credit futures have been tried for more than a decade, but there are signs that the market is finally ready for these carefully crafted tools. Whatever the outcome, new competition in the U.S. interest rate futures complex will only benefit end users. All of this will unfold against a backdrop of reduced regulatory red tape, which could speed up the approval of new products.

This supply and demand dynamic is driving investment in market infrastructure. Post-trade processing technology – often overlooked by more front-office tools that generate return on investment – ​​is getting the attention it deserves, ensuring the market’s growth is not hampered by inefficiencies and unnecessary operational risks. Investors are expected to join faster, position shifting will be more efficient, and profit optimization will receive a renewed focus.

7. Market data supply and demand remain unsatisfied

Our research shows that market participants again expect to spend more on market data in the year ahead. Just like your grocery bill, inflation plays a role—but that's not the real story. Whether entering a new country, a new asset class or a new investment strategy, the first step is always obtaining new data. While supply does not need to grow to keep up with demand (you can sell the same data sources as you like), the data available for purchase continues to expand (e.g., alternative data, cryptographic data) as traders and investors increasingly Work hard to find advantages in existing and new markets.

The data itself is only the first step in this journey. New delivery mechanisms (e.g. cloud for real-time market data), better analytics (AI anyone?) and tools to make this data actionable on the trading desk are all key investments to support the need for more market data field. None of this is one size fits all. While speed is important to some traders, historical data may be more important for others to test strategies. This is why market breadth and delivery mechanisms are critical to any market data business today.

Market data businesses are not recession-proof. A market downturn could mean fewer clients in the short term as capital pools shrink and underperforming strategies are shuttered. But ultimately, institutional trading and investing cannot happen without market data, which means the long-term spending chart will only move up and to the right.

8. Mandatory repurchase liquidation promotes innovation and competition

Despite the change in leadership in Washington, the SEC's authority to clear Treasury repurchase transactions is a rule that should stick. We and our research participants believe this will be a net positive for the market, although development costs and short-term complexities for market participants must be addressed. The repo market is one of the most important of all financial markets, so it makes sense to inject some standards and additional risk management processes into the market.

Empowerment will also lead to innovation. Clearing and more standard product terms make it easier to trade electronically, which will lead to increased trading volumes for both existing businesses and new entrants who may sniff an opportunity. In turn, trading mechanisms are likely to become smarter, drawing inspiration from innovations used in other parts of the electronic fixed- income market.

These same market standards and trading mechanisms can also open the market to new buyback buyers and sellers. It will be easier for those who have cash on hand to generate returns, and it will be easier for those who strategically deploy cash to borrow cash, which will inject more liquidity into the overall market.

9. The love story between TradFi and DeFi is getting stronger

Trading cryptocurrencies via blockchain and bonds via ETFs is an established fact, but now things have changed: we can trade cryptocurrencies via ETFs (as well as futures and options) and bonds via Ethereum. DeFi companies see an opportunity with TradFi assets, but perhaps more interestingly, TradFi companies are introducing access to TradFi assets through DeFi mechanisms.

Admittedly, it all seems a bit repetitive on the surface. Why trade Bitcoin via an ETF when the whole point of Bitcoin is that you can trade it directly outside of the financial system? Likewise, money market funds are easily accessible to anyone with a brokerage account. So why is there a crossover?

Many traditional investors want to get into the cryptocurrency market but would rather go without the hassle of opening a new account - it's easier to park it in their existing taxable or tax-free account. The same goes for DeFi investors in this industry (yes, they exist). Putting your on-chain stablecoins (i.e. cash) into a vehicle backed by a large asset management firm that holds U.S. government debt not only generates yield, but also stores those funds securely within the digital ecosystem.

Whether all finance will shift to DeFi in the next decade, or whether the two worlds will eventually coexist in a more seamless connection, is difficult to predict. But the love story between TradFi and DeFi has definitely just begun.

10. Growing investment in operational and compliance technology

Operations and compliance professionals have long been told to do more with less. Post-trade spending is more like a game of whack-a-mole than a long-term strategic investment. Why spend money on a new settlement system when you can spend money to develop a new execution algorithm and generate significant returns in the first year?

We get it – spending money to make money is important. But if the foundation is weak, it is impossible to make money. Those who pay close attention to operations and compliance infrastructure understand that the goal is not just to reduce costs, but also to increase scale, reduce risk and achieve strategic goals. That’s why mainframes gave way to the cloud, anomaly alerts gave way to AI monitoring, and margin management spreadsheets gave way to portfolio management systems that help optimize collateral.

Industry initiatives such as T+1 and the upcoming Treasury Clearance Authority are forcing changes and improvements to existing technologies and processes. These investments not only speed up processing but also increase the value that the backend provides to the frontend. Better post-trade data means portfolio managers have a more accurate, real-time view of risk, while smart compliance checks can ensure greater flow of capital and avoid regulatory surprises.