Look Back at 2025 Capital Markets

Capital markets have been shaped this year by digitisation, shifts in investor base in derivatives and equities, and systematic shifts in debt. There have been pressures on sovereign debt in Europe, the US and the UK which are driving the conversation in public finances. Advances in digitisation are reshaping the debt capital markets (DCM). Corporate bond issuance is climbing, new non bank-financial institutions (NBFIs) are changing where liquidity can be found. Foreign exchange markets are expanding rapidly, driven by technology adoption and the rise of non-bank liquidity providers. The UK remains the global hub, while structural complexity and liquidity fragmentation introduce new risks.

Institutions and regulators are responding to growing leverage and derivative use. Derivatives markets are evolving with greater retail participation and geographic diversification. Exchange-traded products and equity options are reshaping market dynamics, supported by technology and modernisation in emerging economies. UK and European equity markets show resilience but face an IPO drought, limiting capital formation. Retail engagement initiatives and product innovation aim to revive participation, while banks lean on options and futures for revenue.

Over the past year, regulatory initiatives in the US, EU, and the UK, especially those focused on strengthening post-trade transparency, have exerted a substantial influence on the structure and behaviour of capital markets. Regulators in the EU and UK have awarded fixed income consolidated tape mandates, but separate regimes risk fragmentation. The UK faces delays and legal challenges, while the EU moves ahead, creating pressure for convergence and operational alignment across markets.

Financial institutions (FIs) and vendors in the EU and UK have had to adapt to market forces and client needs amidst a shifting technological landscape. The Digital Operational Resilience Act (DORA) is driving change in operational resilience across EU firms, increasing automation, vendor assurance and real-time threat intelligence. Reconciliation remains critical yet underinvested, with many firms relying on spreadsheets lacking controls and auditability. Emerging technologies offer automation, AI-driven matching and real-time processing. UK boards face SOX-style internal control attestations from 2026, while EU firms adapt to sustainability and AI regulations. Vendor consolidation accelerates as scalability becomes essential for regulatory and technological resilience.

Regulatory changes and technological acceleration shifted the ground beneath the feet of Fls in the EU and the UK. As such, the market seemed to be in a holding pattern, dealing with these challenges without fostering significant macroscale growth and waiting for the next stage of the business cycle. The UK remains a fintech powerhouse, with the success of its challenger digital banks (Revolut, Starling etc), payment platforms (Wise) and fintechs showing its strength, tempered by the prospect of some of these firms leaving the country. On the other hand, US FIs enjoyed a stronger economy and stock market with a booming technology sector. Overall, the themes of 2025 were automation in regtech and the deployment of AI and digital assets.