Asia-hours liquidity thins as market makers consolidate desks
Order-book depth during the Singapore session has fallen for three straight months as smaller firms wind down principal trading.
Average order-book depth within fifty basis points of mid has declined for a third consecutive month during Asian trading hours, according to venue data reviewed by DC10AUDIO covering five exchanges that publish depth snapshots.
Two mid-sized proprietary firms told DC10AUDIO they have reduced principal quoting in the region, citing capital costs and the difficulty of hedging inventory across venues with different margin regimes.
The result is a market that looks unchanged on headline volume but behaves differently under stress. Slippage on a notional order size that barely moved the book last winter now costs several times as much during the same hours.
Larger firms are picking up share rather than replacing depth one-for-one. Concentration of quoting into fewer balance sheets is what desk heads say they are watching, because a single firm stepping away now removes a larger share of visible liquidity.
Venues have responded with fee rebates targeted at passive quoting. Whether incentives are enough to reverse a structural retreat is, as one head of trading put it, "a question for the next volatility event, not for this one."
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