The next opportunity for ETF liquidity providers
ETFs were born out of investor demand for efficient, low cost and easily tradable access to diversified exposures. Early ETFs tracked broad equity benchmarks, offering passive, rules-based exposure that often outperformed active strategies. Their clarity and transparency fueled explosive growth, supported by an ecosystem of issuers, authorized participants, market makers, exchanges, and index providers—each optimized to support benchmark replication.
The ETF model extended naturally into fixed income because it solved bond market inefficiencies. By bringing over-the-counter instruments onto exchange, bond ETFs delivered price transparency and daily liquidity to an opaque market. Fixed income ETFs are now among the fastest growing categories globally. During stress events such as the March 2020 “dash for cash,” they often traded more efficiently than their underlying bonds—cementing their role as core liquidity tools for both retail and institutional investors.
With core equity and bond exposures largely in place, investors are demanding tools that tailor or enhance returns. Innovation has accelerated around two themes:
According to data from the Broadridge Global Demand Model, global active ETF AUM grew from $368 billion in 2021 to a 2025 estimate of $1.364 trillion and in 2027 expected to reach $2.442 trillion underscoring investor appetite for strategies that go beyond index replication. Despite this surge, active ETFs still comprise only 10% of total ETF assets under management (AUM), clearly suggesting significant room for expansion.
The potential scale of outcome-based ETFs becomes clearer when compared with Europe’s structured products markets, especially with Germany’s index linked segment.
| Metric | ETFs (Europe) | Structured Products (Europe) | Index-linked Structured Products (Germany) |
|---|---|---|---|
| Number listed | 6,500-7,000 listings 
(~2,300 ETFs) | ~1,600,000 | ~300,000 |
| Asset / Notional | €1.5-1.7 trillion | ~€400 billion | ~€33 billion |
As ETFs evolve into packaging investment vehicles combining multiple asset classes, option-like and structured payoffs, the role of market maker fundamentally shifts from delta-based inventory management to full risk intermediation. Rather than providing liquidity based on relatively static risk decomposition onto its constituents and proxies and hedge on the open market, the market maker must:
The convergence of ETFs and structured products is creating new opportunities for liquidity providers who can price, hedge, and manage optionality with precision. As ETFs evolve to resemble structured instruments rather than simple index trackers, success will hinge on cross asset expertise and advanced risk intelligence.
The next phase of ETF growth will be defined not by lower fees, but by the sophistication and agility of market makers that can dynamically manage complex, multi-asset exposures. Those that master this convergence will shape the future of ETF liquidity and market efficiency.
There is now a clear opportunity for market makers to rethink their trading technology:
Tbricks powers the ETF trading desk of the future by combining cross-asset expertise, advanced risk intelligence, dynamic hedging, modular agility, and scalable connectivity. This directly addresses the demands of complex, multi-asset, outcome-based ETFs and supports market makers in shaping the next phase of ETF liquidity and market efficiency.
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