Asset prices are the result of the continuous interaction between buyers and sellers. For this meeting to work, a trading environment alone is not enough. Liquidity is essential.

Liquidity goes beyond traded volume. A liquid asset can be bought or sold quickly without a significant impact on its price. This depends on the depth of the order book and having enough orders to absorb trades of varying sizes.

But these orders do not appear spontaneously. Liquidity emerges from the interaction between participants with different interests and time horizons. While some need to trade immediately, others leave orders available and wait for a counterparty. In doing so, they take on the risk of price fluctuations and the cost of carrying the position.

Risk appetite is not constant; it is shaped by existing incentives.

A clear example is the role of so-called market makers. These participants maintain buy and sell offers within parameters such as quantity, spread, and uptime. By doing so, they contribute to the depth of the order book and can foster tighter spreads. In return, market-making programs may offer fee benefits and, in some cases, compensation for providing liquidity.

Infrastructure does not create buyers and sellers, but it does influence the decision to participate and direct orders to a specific environment. Competitive costs, clear execution rules, and efficient technology affect the conditions under which participants are willing to provide liquidity.

Competition between environments also alters these incentives. Different structures can create opportunities and make trades viable that previously lacked the economic conditions to exist.

In markets with multiple exchanges, the liquidity of a single asset may be distributed across different order books. Looking at each environment in isolation fails to show the total liquidity available in the market.

This is where the concept of aggregated liquiditycomes from, which considers the offers available across different environments collectively. The order books remain separate, but for the investor, liquidity becomes what is available in the market as a whole.

The entry of a new exchange does not simply mean splitting existing liquidity between two books. By changing costs, incentives, and opportunities, competition can also change participants' willingness to conduct new business.

This does not mean that multiple exchanges automatically produce more liquidity. For competition to benefit the market, what matters is not just how much liquidity exists in each environment, but how easily participants can identify and move between these environments.

When liquidity is distributed across different books, finding the best offer is no longer trivial. Identifying and accessing it becomes part of the efficient functioning of the market itself.