Recent geopolitical developments strongly influence pricing on capital markets
Investors make investment decisions based on expected future returns. Economic developments, the level of interest rates and future expectations are still important factors that determine price formation. However, there are other factors that influence the price formation process in today's capital markets, especially in the short term. Sudden changes in sentiment due to political developments, price developments of correlated instruments and directional messages on social media are just a few examples of elements that can have a direct price impact. In the third edition of the State of the Capital Markets, the Dutch Authority for the Financial Markets (AFM) uses current data to provide insights into the price formation process.
- Recent geopolitical developments have had a strong impact on price formation
- The percentage of value traded at the close is increasing
- Share trading has internationalised significantly in the current landscape
Recent geopolitical developments have had a strong impact on price formation
The market turbulence at the beginning of April this year due to the import tariffs announced by the United States has been reflected in the price formation process. An analysis of the rolling 10-day average difference in points between the open and close of the Amsterdam Exchange Index (AEX) and the overnight close and open from mid-March to mid-April shows large price moves outside of European trading hours.The percentage of value traded at the close is increasing
There is a clear upward trend in the proportion of trading taking place during the closing auction. The percentage of traded value during the closing auction is almost 10 percentage points higher in 2025 (year to date) than in 2020. This is particularly interesting because the close is where genuine supply and demand meet the market. This upward trend is seen not only in the Netherlands; trading in other European jurisdictions is also shifting increasingly to the close of the trading day.Share trading has internationalised significantly in the current landscape
Most trading in Dutch shares is by non-Dutch entities, with British firms conducting the majority of transactions on the AEX (24%), AMX (34%) and ASCX indices (32%). France and Ireland are also strongly represented, with 21% and 20% of transactions on the AEX. Dutch trading firms conduct only 17% on average in AEX shares, 14% on the ASCX and 9% on the AMX, the report State of the Capital Markets says.Hanzo van Beusekom, AFM executive board member: ‘The international interconnectedness of the capital markets shows how essential cooperation between European regulators is. As strong proponents of the European Savings & Investments Union (SIU), we’ve seen the recent geopolitical developments create a renewed sense of urgency in establishing the SIU. Harmonising rules and aligning supervisory practices will bring us closer to that goal, as will a shared set of capital market data.’
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