The European Securities and Markets Authority (ESMA) has unveiled its final plans for the region, aimed at boosting the resiliency of the markets, improving transparency, and simplifying reporting.
The final report follows the Mifir and Mifid II revisions published in the EU’s official journal in March 2024.
Systematic Internalisers
Taking stock of the current set-ups for SI’s, ESMA is focused on implementing standardised procedures to introduce a more structured process for informing national regulators.
The latest report highlights the fact that though the Mifid II review removed the quantitative test during calculations determining whether an investment firm qualifies as an SI, these changes will only apply once the changes to Mifid II are transposed into national law – forecasted to be by 29 September 2025.
Included in the final rules are a reduction in the number of fields in reporting template, aimed at easing the process and “striking a balance between brevity and completeness, removing fields deemed less necessary while retaining essential information”.
In addition, information as to whether the SI also acts as designated publishing entity (DPE) will be required, and the period for notification has been increased from two weeks to 20 calendar days.
Furthermore, ESMA has confirmed that it will discuss where further guidance is needed with National Competent Authorities.
Read more: Optiver to convert to a systematic internaliser
Recent market activity has brought the topic of SI’s and their set-ups under the microscope of late, with Optiver confirming its decision to become a systematic internaliser earlier in April, as revealed by The TRADE.
The move will change the way that the market maker reports its trades, where before it has printed its volumes in the off book on exchange segment.
Double volume caps
Elsewhere, ESMA proposed a shift in how trading volume is measured, from double volume cap (DVC) to single volume cap (SVC).
Through the move, firms will no longer be required to report certain trading data every day.
Notably, the decision is set to affect dark trading processes, where previously the entire dark pool market, and indeed no single pool, could exceed a certain limit, this shift to SVC signals a significant change. Now, the watchdog is seemingly open to increased participation in this sphere, focused on the whole volume instead.
Read more: The dark trading debacle – does anyone even care?
ESMA’s final report on equity transparency from December 2024 considered decommissioning Financial Instruments Transparency System (FITRS) and DVC systems, instead suggesting the use of transaction data reported under Article 26 of Mifir for transparency calculations.
FITRS quantitative data is set to be decommissioned on 1 January 2026 and FITRS reference data on 1 January 2027, with the phasing out of daily reporting requirements for trading venues, Approved Publication Arrangements (APAs) and consolidated tape providers.
“This simplified approach is a concrete and substantial contribution to ESMA’s objective to reduce the overall reporting burden,” said the regulator.
“By design, this changed and simplified approach addresses comments expressed on the need for an appropriate implementation timeline, as the relevant calculations will be performed based on the current reporting framework for transaction data, with post-trade flags.”
ESMA also took time to remind market participants that when it comes to MIC, it is mandated for the ‘venue’ field in the Mifir transaction reporting validation rules – reiterating that the operating MIC is only to be used where the segment MIC does not exist.
Speaking to The TRADE, Iván Lorenzo, product manager for equity products at BME, highlighted the relevance of the transition from DVC to SVC following their launch of a new dark pool last year – a bid to provide an additional source of liquidity for Spanish securities.
“This shift marks much-needed simplification in the regulatory framework governing dark pool trading across Europe,” he enthuses.
“This change not only streamlines compliance processes but also enhances market efficiency by focusing on the aggregate trading volume across all dark pools, rather than monitoring each venue individually. We welcome this development as it aligns with our commitment to providing efficient trading solutions for Spanish market securities.”
Circuit breakers
ESMA has also shared insights into its expectations for trading venues as pertains circuit breakers, including information on how to set up the mechanism.
The move follows changes brought in by the DORA regulation, focused on digital operational resilience. In times of market instability, it is arguably more important than ever to be able to temporarily pause trading as the market swings dramatically.
Read more: Market outages and resiliency a must watch area for market participants going forward
The trading venues in question, including national stock exchanges, must adhere to a methodology related to the calibration of circuit breakers which “should be designed at the asset class or sub asset class level,” explained the watchdog.
“Establishing that the methodology should consider some characteristics of the financial instrument does not preclude trading venues from establishing a methodology at the asset class or sub asset class level.”
Specifically, among these characteristics are liquidity, quotation level and volatility of the instrument.
When it comes to updating circuit breakers, ESMA’s final rules suggest basing changing on statistical evidence where possible.
The final report was submitted to the European Commission on 10 April 2025, which now has three months to decide whether to endorse the proposed amendments.