European regulators have brought an abrupt and unexpected end to a group of trading venue’s plans to launch trajectory crossing in the region with a last-minute rule change.
Featured in its final report on equity transparency, published in December, the European Securities Markets Authority (ESMA) added an additional line to its text surrounding the specific characteristics of negotiated transactions, preventing exchanges from using the model on their own behalf.
“A negotiated transaction […] shall be considered to be a transaction which is negotiated privately without the assistance of a system or trading protocol operated by a trading venue,” said the watchdog in its findings.
Speaking to The TRADE, sources familiar with the matter confirm that the changes were made last minute and without industry consultation.
ESMA declined to comment on the changes.
Trajectory crossing became a prominent topic throughout the industry for a short period last year, with a flurry of new venues planned to go live throughout the first half of 2025. In the last six months, Aquis, Cboe Europe and Nasdaq Europe have all confirmed plans to launch European trajectory crossing products using the negotiated transaction model.
Read more – Cboe Europe new VWAP crossing service to launch in Q4
However, ESMA’s recent decision has all but banned the offerings in Europe, roadblocking their broader plans and leaving the pan-European trading venues with their UK versions only.
Cboe’s UK VWAP-X service went live last year, however, its European counterpart was delayed to Q1 of this year due to regulatory hurdles.
“We’re disappointed by the recent ESMA proposal that could limit the availability of trajectory crossing within the EU venue ecosystem, to the disadvantage of EU-based investors and brokers,” Natan Tiefenbrun, president, North American and European equities, Cboe Global Markets, told The TRADE.
“Our focus is on growing the user base of this platform in the UK, which launched in Q4 2024, whilst continuing to engage with regulators as we seek ways to extend the service to include EU equities.”
Aquis Exchange’s new UK VWAP matching service is set to go live in the first quarter of this year, as revealed by The TRADE in December.
Speaking to The TRADE at the time, Aquis confirmed that the service had received a non-objection from the UK’s Financial Conduct Authority (FCA) and that it was in the process of working with regulators in Europe.
Read more – Aquis VWAP Match service set to go live in Q1
“The launch of Aquis VWAP Match (‘AVM’) is continuing as planned in the UK, and we are excited to bring this product to our UK members very soon,” a spokesperson from Aquis told The TRADE.
“We are continuing dialogue with our European regulators and, as always, maintain a suite of products to meet the trading needs of our members in line with jurisdictional regulation.”
Crossing services as a concept is not a novel one for Europe. Scrapped in 2018 under Mifid II, former broker crossing networks (BCNs) used a similar workflow. Prior to the regulatory change that banned the ‘venues’ among other market changes, many brokers would leverage their algo plant to do VWAP or trajectory crossing.
Given the regulatory changes brought in by ESMA in December, this flourishing landscape is set to look vastly more different in Europe than expected.
“This regulatory development presents challenges to our planned service launch in Q1 2025,” said Nasdaq in a statement. “We remain committed to providing PureStream to our clients and will continue our dialogue with the regulators as well as exploring alternative solutions to advance in this direction.”