The markets saw increased activity in periodic auctions relative to dark order books in September, a trend likely linked to the new Single Volume Cap (SVP) in the EU, explained Hayley McDowell, head of European market structure, RBC on Wednesday.
“There has been a notable shift from dark trading into periodic auction venues since the implementation of the new cap. Periodic auctions appear to be absorbing some of the liquidity previously seen in the dark.”
Speaking at a closed market structure roundtable, McDowell further added that the additional effects of the SVP are still yet to be fully realised.
Though the SVC came into effect only very recently – 14 October – and the full impact on liquidity and dark trading behaviour is still being assessed, “early indications suggest that more instruments than expected may be affected,” said McDowell.
Prior to the decision from ESMA to shift how trading volume is measured, from double volume cap (DVC) to single volume cap (SVC), the entire dark pool market, and indeed no single pool, could exceed a certain limit.
“The new SVC limits dark trading to 7% of total aggregated EU trading volume, replacing the previous DVC which restricted dark trading to 4% per venue and 8% market-wide. Under the SVC, stocks that breach the cap will be suspended from dark trading for three months, compared to six months under the former DVC regime,” explained McDowell.
“A key change under the SVC is that ESMA is leveraging transaction reporting data rather than venue-reported data to calculate the caps. This is expected to provide a more accurate view of trading activity.”
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When it comes to the empirical implementation of the change, across the market discussions from some participants suggest that the number of capped stocks under the SVC is significantly higher than anticipated, said McDowell.
While the industry’s attention has been elsewhere, the full effects of the change and its potentially far-reaching results have perhaps flown under the radar thus far – but time is set to tell as to the practical impacts.
“If these early data points are accurate, it suggests the market may have underestimated how restrictive the new single volume cap would be. This will likely remain an area of focus in the coming weeks as data settles […] We’re continuing to monitor the SVC impact closely and should have clearer insight in the next few weeks once the data stabilises,” added McDowell.
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The European Securities and Markets Authority (ESMA) unveiled its final plans for the region in April 2025, with plans aimed at boosting the resiliency of the markets, improving transparency, and simplifying reporting.
The final report followed the Mifir and Mifid II revisions published in the EU’s official journal in March 2024.