European securities regulators launched a consultation on a series of proposed changes to their trading rules that aim to boost market transparency and stability, while cutting the regulatory burden and boosting competition.
The European Securities and Markets Authority (ESMA) published a paper that details a collection of proposals including new standards for investment firms’ internal trading platforms, revisions to the rules on equity liquidity assessments, and provisions on consolidated trade reporting and post-trade reports for non-equity instruments.
In the wake of recent market stress events, the proposals also include new circuit breaker requirements for trading venues.
In the paper, ESMA noted that, while trading circuit breakers generally worked well in the face of the market volatility that accompanied the pandemic, episodes of extreme volatility in the commodity derivatives markets during the European energy crisis of 2022 and a flash crash that same year highlighted the need for reform in this area.
ESMA is proposing new principles-based requirements for these trading safeguards while preserving some discretion for trading venues in calibrating their own circuit breakers.
It’s also seeking to set standards for the disclosure provided to investors by trading venues on the details of their mechanisms for halting, or curbing, trading. And it proposes standards for reporting to regulators on the calibration of circuit breakers.
Taken together, the proposals are intended to increase transparency and systemic resilience in financial markets, reduce the regulatory reporting burden, and promote convergence in regulatory supervision, ESMA said in the paper.
“Once these standards are approved, they will facilitate the implementation of the consolidated tape provider (CTP) in the European Union as well as contribute to a more informative pre-trade and post-trade transparency regime,” the regulators said.
Additionally, by streamlining reporting requirements, the proposals “aim to foster efficiency and competitiveness in European financial markets,” ESMA said.
The deadline for providing feedback to the consultation is Sept. 15 for certain technical provisions, and Oct. 15 for other aspects of the proposals.
ESMA said it aims to finalize the technical requirements by the end of the year, and the other requirements by March 2025.