As the market structure continues to evolve and regulatory scrutiny looms on the horizon, broker-dealers need to brace for tumult.

“Over the last two years, we’ve seen one of the most intense regulatory environments in recent history on a global basis,” said Charles Susi, managing director and global co-head of direct execution services at UBS. “This meant we had to keep up with changes in market structure, while we contended with record low levels of liquidity overall.”

With the ongoing macroeconomic issues continuing to linger, trading activity and volumes will remain suppressed. Coupled with the uncertain regulatory environment, challenges lie ahead.

“So the last two years made everyone in the market push the envelope to deliver more when the environment offered less, and look for ways to improve their order management behavior, making their strategies more sensitive to short term liquidity – both lit and non-displayed, their access to the markets faster and more astute, and their execution performance more competitive – all while trying to plan for and stay compliant with shifting regulatory mandates,” said Susi.

Most of the concerns facing investors for much of 2011 have still not been alleviated. Europe’s debt crisis is still front and center, while the U.S. economy continues to be stagnant amid high unemployment and the presidential election looms on the horizon. Investor confidence as a result has remained depressed.

Trading volumes have been on a steady decline in recent years which has left many broker-dealers consolidating their operations or even shutting down. Since the start of the year, average daily equities volume has been in the 6.9 billion range, down from the 8 billion seen in the same period last year. The total number of broker-dealers registered with Finra declined from 4,578 at the end of 2010 to 4,456 at the end of 2011, a drop of nearly 3%.