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ETF Minds: Nicholas Phillips on the Future of ETF Liquidity and the Need for More Market Makers
The ETF market is growing fast, but liquidity is lagging. Nicholas Phillips explains why that needs to change.
By Trackinsight
November 4, 2025
- ETF Industry
As part of Trackinsight’s ETF Minds series, Nicholas Phillips, President of ETF Capital Markets Advisors LLC and a 25-year veteran of the ETF ecosystem, shares his perspective on the evolution of ETF market structure. He discusses the growing need for liquidity diversity and explains why large banks can no longer afford to sit on the sidelines.
Nick, you’ve written extensively about ETF market structure. How would you describe the current state of the ETF ecosystem today?
The ETF ecosystem is more efficient than ever in terms of technology and transparency, but it’s also narrower.
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We’ve seen remarkable innovation from issuers, but not the same level of growth in market-making capacity.
The system functions well under normal conditions, yet liquidity provision is highly concentrated. As product counts rise and new issuers enter the space, that imbalance will become more visible.
Why do you believe the market needs more market makers?
The ETF market is designed to thrive on competition.
When more desks make markets, spreads tighten, execution improves, and investors benefit.
But with the massive increase in ETF listings — many of which trade with very little volume early on — competition has shifted.
Market makers today often focus on RFQs and large block trades rather than maintaining live quotes across hundreds of smaller products.
That’s understandable: quoting too many ETFs simultaneously can expose them to risk if there’s a technology glitch or pricing disruption.
As a result, many firms quote selectively, leaving new ETFs with limited on-screen liquidity even when institutional interest exists behind the scenes.
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