While that is true this happened there is literally zero relationship to lesser liquidity. In US markers retail does not drive market liquidity in any meaningful way. And the free money over the past 15 years has provided all medium and larger players with ample funding to make margin levels completely meaningless to them.
Although the margin has increased massively, the N Q futures volume has also increased substantially (see above chart)
From (Bloomberg) last week:- And finally, here’s what Katie's interested in this morning Wednesday marked the official start of the Federal Reserve’s balance sheet shrinkage, with a $15 billion batch of Treasury securities set to mature -- without reinvestment -- on June 15, she writes in The Weekly Fix. Given that this is the second time in modern history that the Fed has embarked on quantitative tightening, there are several enormous question marks. A big one is what the runoff will mean for the economy and fighting inflation (Fed Governor Christopher Waller: it’s “ highly uncertain”). Perhaps a harder question is what shrinking the balance sheet will mean for already-fraught trading conditions in Treasuries. Liquidity in the $22 trillion market has deteriorated over the past few months, with the Bloomberg US Government Securities Liquidity Index -- a gauge of deviations in yields from a fair-value model -- hovering near the highest levels since March 2020. Fed officials are seemingly well aware of the risk as the portfolio shrinks. The minutes from May’s meeting showed that several policy makers “noted that the tightening of monetary policy could interact with vulnerabilities related to the liquidity of markets for Treasury securities.” Layer in the fact that capital requirements have kept the big US banks from adding to market-making capacity in Treasuries over the past few years, and the outlook appears dicey. “Liquidity isn’t great and financial conditions are already tightening before dealers even need to intermediate these Treasuries and mortgage-backed securities,” said Deutsche Bank AG strategist Tim Wessel. That brings back nasty memories of late 2018. Fed chief Jerome Powell’s remark that the balance-sheet unwind was running on “autopilot” sent the S&P 500 to the brink of a bear market -- a revolt that ultimately put an end to the central bank’s hiking campaign. No such salvation is expected this time around, with Powell hell-bent on tightening financial conditions. The Fed’s portfolio is projected to drop to $5.9 trillion by mid-2026, with the balance sheet shrinking by an average of $80 billion per month through 2024.
For a small time during the COVID shut down when everyone got a stimmy I saw 4x the volume on the ES. Now it’s back to about 2,000 contracts on each side.
Other than during the big drop in early 2020 overall daily ES volume is comparable to pre-pandemic. And is actually very much above last year.
Cancelled my FT subscription a few years ago so haven't read OP's link, but; Market depth is inversely proportional to volatility, there are a number of studies that show this. That in turn makes it harder to get in and out with size at short notice in volatile markets. Then of course we have volatility targeting strategies (a subset albeit a large one of all market participants) trading fewer contracts the higher volatility is, due to the hypothetical ideal position size being proportional to the inverse of volatility (constant risk). Market depth has never fully recovered after the "XIVpocalypse" / XIV ETN blowup in 2018. lol @ the guys suggesting retail stimulus checks are driving US index futures market depth.