Andrzej Domański

Under the proposal, the standard settlement cycle for transactions in transferable securities – such as shares and bonds traded on EU venues – would be shortened from T+2 to T+1. 

SFTs, which allow market participants to raise short-term funding through temporary transfers of securities, were excluded due to their non-standardised nature and the bespoke settlement periods often negotiated between counterparties. 

To prevent any regulatory loopholes, the Council clarified that the exemption will only apply if SFTs are documented as single transactions comprising two linked operations. 

“A shorter settlement cycle of one day will make our capital markets more efficient,” said Andrzej Domanski, Poland’s minister of finance. “This is a concrete step to give heed to the calls to boost the EU’s competitiveness.” 

With the Council’s position now established, inter-institutional negotiations with the European Parliament (trilogues) can now start. The final version of the legislation must be jointly agreed by both bodies before it is adopted. 

If approved, the new rules will take effect from 11 October 2027, allowing time for market participants and infrastructures to make the necessary operational adjustments. 

In March, The TRADE’s sister title, Global Custodian, spoke to Giovanni Sabatini, chair of the T+1 Industry Committee for Europe, where he discussed the next steps in the EU’s T+1 roadmap, the biggest challenges and just how mammoth the task is given the complexities of the continent’s sheer number of markets and infrastructures.

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Hidden Road’s new status as a FINRA-member will allow the firm to offer new and existing institutional clients with services in fixed income assets, including regulatory-compliant prime brokerage, clearing and financing.  

The approval also builds on Hidden Road’s recent expansion of its fixed income prime brokerage platform, which saw the firm sign a deal in June 2024 to distribute Trading Technologies’ (TT) multi-asset trading platform to its clients.  

Hidden Road’s fixed income prime brokerage platform currently spans fixed income repo and global funding services.  

“Our broker-dealer registration is a significant step in the development of Hidden Road’s fixed income prime brokerage platform and bolsters our capabilities in traditional financial markets,” said Hidden Road president, Noel Kimmel.  

“As a FINRA member, we will be able to bring our best-in-class, technology-driven fixed income service offering to an expanded universe of institutional clients. Our business has tremendous momentum, and we look forward to continuing to provide superior execution and support to our clients amidst today’s exceptionally dynamic market environment.” 

The move comes following Hidden Road’s announcement at the beginning of April that it would be acquired by digital asset infrastructure provider Ripple in an agreement valued at $1.25 billion. 

Read more: Ripple becomes first crypto business to own a global multi-asset prime broker as it picks up Hidden Road for $1.25 billion 

The deal is set to close in the coming months, subject to regulatory approval, and will mark one of the largest acquisitions in digital assets, with Ripple becoming the first crypto business to own a global multi-asset prime broker.  

The acquisition will see Hidden Road transfer its post-trade activity to XRPL, while Ripple is expected to offer custody services and Ripple Payments, the crypto business’ cross-border payment solution, to Hidden Road’s clients.  

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Tabled as part of a consultation paper launched on 15 April, the European watchdog has asked participants how effective they believe the order protection rule is for guaranteeing the best price for clients/investor protection, speed of execution, level of execution fees, split of liquidity, interconnection between trading venues, efficiency of the price formation process, modernising trading protocols and trading.

Implemented as part of Reg NMS in 2005, the US order protection rule mandates that orders be executed on exchanges that show the best price. Orders are re-routed to other competing venues if it cannot be executed at what is considered the best price.

The European Commission’s consultation has asked participants for their assessment of EU infrastructure to cater for the rerouting of orders to venues offering the best price – as per the requirements of the rule. It has also asked respondents to note if they think the geographical positioning of venues would pose an issue, and what the necessary arrangements and costs could be.

Those responding are also invited to give their opinion on the effectiveness of best execution rules in Europe, requiring them to list whether the EU or the US framework is most effective for obtaining the best results for clients.

Brought in under Mifid II, the best execution obligation requires that firms take all necessary and reasonable steps to ensure the best result for an order.

The European Commission’s consultation touches on a wide range of market areas as part of its objective to gather stakeholder feedback on obstacles to market integration across the EU. When it comes to trading specifically, the paper has a heavy focus on market harmonisation, with many sections dedicated to the potential benefits and feasibility of creating more integrated markets in Europe.

Numerous questions relate to what respondents believe could be barriers to integration across the 27 member states and their markets. It also asks respondents to assess both direct execution and indirect execution of orders, as well as the various fees charged for connections to venues across member states.

The 375-question strong consultation also assesses several other market areas including dark trading levels.

The paper asks participants why they think dark trading is growing, whether that be regulation, liquidity fragmentation, order flow competition, technological developments, or the growth of ETFs and passive management. Participants are also prompted on their thoughts on reference price waiver is fit for purpose and asks them to assess the current criteria for reference price.

The return of VWAP crossing?

Notably, the consultation asks if trading venues should be allowed to use the negotiated price waiver to execute negotiated transactions that take place with the assistance of a system or trading protocol operated by the trading venue.

Read more – ESMA thwarts European trajectory crossing plans with last minute rule change

The consultation follows European regulators’ decision at the end of last year to bring 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. Said venues had been planning to use the waiver as the basis for their models.

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. The rule change put a stop to exchanges’ plans in Europe.

The decision has received significant hit back from several parties – namely the venues looking to launch these products in Europe.

However, Tuesday’s consultation suggests the European Commission could be open to reassessing.

24-hour trading, the consolidated tape and the close

The extension of market trading hours for equities has become a hot topic in the US in recent months. While a handful of technology providers have offered out of hours trading for several years now, the decision by several incumbent exchanges to begin exploring implementing an extension of trading hours suggests the theme is becoming mainstream in the US.

Europe, however, seems to tell a different story. A few years ago, European participants were petitioning for the shortening of market hours. As US venues apply to regulators for the lengthening of their trading day, their European peers have shown little to no sign of following suit.

The European Commission’s consultation released on Tuesday asks respondents how positive they deem extended trading hours/24-hour trading to be for the development and competitiveness of EU markets, also asking if it is “advantageous” or “risky”.

When it comes to the tape, the Commission has also asked participants opinions on several technical elements including how effective lifting the anonymity of the EBBO, the importance of expanding the depth of the EBBO displayed, and the speed at which core market data should be disseminated by the tape.

Centrally the European watchdog has asked whether systematic internalisers (SIs) should contribute to the tape and which amendments to their regulatory framework would be required to effectively include them as contributors of equity pre-trade data.

The consultation also explores bilateral trading levels, single market marker venues and ghost liquidity, as well as, closing auction activity, with several questions asking participants why they think the close has grown so much and what fees they are charged on competing venues.

Respondents have until 10 June to submit their feedback to the watchdog. Meanwhile, an online questionnaire through which participants can respond to the consultation will be available as of 22 April 2025.

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Daniel Labovitz

Through becoming a registered securities exchange, GIX will become the firm stock market in the US focused on the $35 trillion sustainability economy.

Speaking to interest in the sustainability-focused exchange, Charles Dolan, co-founder and president, previously told The TRADE that important conversations were underway with key buy-side players, explaining: “Our discussions with major buy-side firms have revealed a high level of interest in our initiative. They believe our direction will significantly influence asset allocation decisions and other industry practices, making it a game-changer for the entire sector.”

The GIX trading platform is set to be powered by MEMX technology and offer non-tiered, competitive liquidity and quoting programs.

In addition, GIX confirmed that it will also be part of the National Market System (NMS), ensuring best execution. 

 “Climate risk is business risk. It’s that simple. US investors and companies are continuing to pursue sustainability because it makes financial and competitive sense,” said Dolan in an official announcement on 14 April.

Read more: Keeping ESG commercial

Speaking to The TRADE last July, chief executive and co-founder Daniel Labovitz, highlighted the importance of the GIX mandate and the opportunity it represents for market makers to voluntarily take on a dual listing matter.

He further highlighted the significance of firms taking accountability through joining GIX, adding that joining the platform will be a reflection of a business’ integrity and the character of its leadership. 

“[…] Contrary to popular belief, an exchange is not just about ‘buy, buy, sell, sell,’ which is the domain of brokers. The true essence lies in the infrastructure that supports these transactions,” he said. 

“The role of GIX is to provide an unbiased platform where investors can meet to buy and sell, guided by credible, reliable, and trustworthy information. This is the essence of what an exchange does, and GIX is committed to fulfilling this need for the sustainability world.”

GIX founders also include Jim Buckley, former chief regulatory officer of the National Stock Exchange, and Lou Pastina, former executive vice president of operations on the NYSE floor. 

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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.

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Among the successful parties are Etrading Software and BondTape, The TRADE can reveal. 

In December 2023, Etrading Software confirmed plans to bid to become the consolidated tape provider (CTP) for both the UK and EU.  

“I am delighted to confirm ESMA has invited Etrading Software (ETS) to participate in the second stage of their Bond CTP Selection and Award process.  We are very much looking forward to having the opportunity to present our solution – ETS Connect – for this important and transformative service,” James Haskell, chief operating officer, Etrading Software, tells The TRADE. 

BondTape is the partnership made up of Propellant and FINBOURNE, with the firms having also confirmed plant to compete to become the UK’s bond consolidated tape provider. 

“We are very happy to progress as the tenders gather pace in both jurisdictions. As speed of delivery will be key, the experience the Bondtape partners already have in delivering production-quality, consolidated market data to banks, asset managers, hedge funds, trading venues and academics differentiates our offering,” said Neil Ryan, CEO-designate at Bondtape. 

ESMA communicated its decision directly to the relevant bidders, The TRADE understands. 

In addition, the fairCT consortium, co-ordinated by Ediphy, confirmed its intention to bid for the European fixed income tape in September 2024, as well as also gearing up to apply in the UK.  

The fairCT consortium consists of Google Cloud, UBS, TP ICAP, Cboe Global Markets, FactSet, and Norges Bank Investment Management. Whether they have been invited to proceed to the next stage is unconfirmed. 

ESMA launched the first stage of the selection procedure for the bond consolidated tape provider (CTP) in January of this year, with interested parties invited to submit by 7 February 2025. 

The watchdog has now assessed these requests against its ‘exclusion and selection criteria’ before informing successful candidates today that they may participate in this second stage. 

As previously communicated, ESMA is set to appoint a CTP by early July 2025, with the successful applicant invited to operate the consolidated tape for a five-year period. 

Read more –  Consolidated tape: Avoiding a ‘garbage in and garbage out exercise’ 

ESMA had not responded to a request for comment at the time of publishing. 

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When asked what their greatest regulatory focus was for 2025 during a live poll, almost half (48%) of those present in the room responded that it was the impacts on price formation in public markets due to increasing bilateral trading. 

In answer, the panellists highlighted the strong correlation between this point and increased inclusion into markets, including retail. The notion of a reversion to more ‘traditional’ methods is perhaps unsurprising, but certainly one which must be addressed, agreed speakers.

One explained: “It’s certainly true that markets are effective when there’s a choice of trading functionalities out there and we’re all conscious of the fact that when you change one aspect of market structure, you need to be mindful of the impact on the structure as a whole.”

Read more: Liquidity, it’s a two-way street

The experts further emphasised that discussions focused on the future of the optionality of systematic internalisers (SI) across the region will also remain key.

Of course, banks have continually offered systematic bilateral liquidity, however the potential for increased adoption is stirring as this landscape continues to evolve.

From the retail perspective

Following on from the conversation on the rise of bilateral trading, panellists were questioned on how retail investors will also be able to get involved in that and what should be front of mind as this continues to play out into the future.

What remains key here, is the notion of choice, coupled with confidence in the markets. As one speaker explained: “Building that confidence is not the job of regulators only, it’s the job of everybody […] what we see is people not understanding markets, if you look at the way markets have been designed, they’ve been designed for well behaving companies that publish quarterly earnings and so on with steady growth.” 

Addressing about the issue of inclusion as regards the retail side, the experts highlighted the importance of protecting investors and the role of education in this.

“Looking at the idea of the education of retail investors, it goes back to this whole debate around looking at the market and actually being able to trust what you see in terms of the data, the reporting.” 

At the same time, not strangling innovation with over-regulation was also brought to the fore.

Read more: The untapped potential of the UK retail market

“It’s important to remember that this does take time. You cannot say ‘okay, we will develop education and tomorrow we will have masses of people investing,’ it requires a holistic view and several things being done at the same time […] at the same time not over protecting is important.”

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The changes in aid of bolstering risk management practices are set to significantly overhaul the $27 trillion market through forcing some cash Treasury and repos to be centrally cleared. 

Specifically, under the rule “a covered clearing agency that provides central counterparty services for US Treasury securities must establish, implement, maintain, and enforce written policies and procedures reasonably designed to require that every direct participant of the covered clearing agency submit for clearance and settlement all eligible secondary market transactions in US Treasury securities to which it is a counterparty”. 

In addition, the rule further obligates covered clearing agencies to closely watch its direct participants’ transaction submissions for clearing, as well as outlining how they address failure to submit transactions. 

Mark Uyeda, acting chair of the SEC, explained: “The US Treasury market is a critical piece of the global financial system. New rules must be implemented properly, and any operational issues must be addressed.

“[…] The Commission stands ready to engage with market participants on issues associated with implementation.”

The decision to extend follows widespread uncertainty from the industry around readiness to comply with the new rules and the potential fallout spilling over into other areas of the market. 

As regards the motivations of the watchdog for the extension, the regulatory body confirmed that “[SEC] staff has become aware, through telephonic meetings and letters, that certain market participants believe that additional time to implement [the rule] would be appropriate. In this regard, a group of trade associations [requested] that the Commission extend the compliance dates established in the adopting release by at least one year.”

The decision has subsequently been made in order to allow firms more time to implement and validate operational changes, with the watchdog specifying that through this move direct participants will be best able to realise necessary risk management changes in order to effectively comply with the rules.

Speaking about the impact of the change, the Fixed Income Clearing Corporation (FICC) said: “FICC appreciates the regulatory clarity around the US Treasury clearing mandate deadlines,” adding that though it would continue with its work in this area, they would “also work closely with our clients to address any challenges that drove the request for an extension”. 

Read more: SEC adopts landmark new clearing rules for US Treasury market

Notably, a separate trade association also submitted a request for the watchdog to extend by two years for repo transactions.

However, the Commission highlighted that any extension longer than one year for the compliance dates for the Trade Submission Requirement would “entail a trade-off,” wherein some costs could be further reduced but also overflow into an additional delay of the benefits brought by the implementation of the rule.

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Following this, the UK’s Financial Conduct Authority (FCA) has welcomed the recommendations, alongside the Government and the Bank of England.   

The FCA stated that it supports the transition to T+1 settlement in UK markets and calls on the industry to engage and start planning as soon as possible.   

“We highlighted how the move to T+1 will make our markets more efficient and support growth in our recent letter to the Prime Minister. We will support industry as they move to T+1 and expect firms to engage and plan early,” said Nikhil Rathi, chief executive at the FCA. 

The plan published by the AST includes a Code of Conduct for market participants, confirming that 11 October 2027 will be the first trading date in UK cash equities for settlement on a T+1 cycle; aligning with the European Union and Switzerland.  

Elsewhere in its report, the AST included five behavioural commitments including a push for automation in SSIs, corporate actions, stock lending recalls, and a focus on ‘action this day’ urging firms to begin planning and where practicable, immediate implementation.  

Read more: UK taskforce publishes blueprint for T+1 transition  

At the time of publication of the report, Andrew Douglas, chair of the UK T+1 AST, said: “This is a milestone in the UK’s journey to T+1 settlement and reflects a substantial amount of work and co-operation across the industry.  

“We have a date and a detailed plan for the way ahead. Market participants should start planning now ahead of the 2025 budget process for project funding in 2026.  Automation will be a key component of a successful implementation.”  

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The dealer rule, introduced in February 2024, required certain hedge funds, among other market participants, to register if they met one of two qualitative standards.

Specifically, the adopted rules meant that an entity would qualify as a dealer or government securities dealer if they regularly express trading interest as close to the best price on both sides of the market for the same security or earn revenue primarily from capturing bid-ask spreads or from capturing incentives offered by trading venues.

If applicable, the new rule would have meant that market participants would have to register with the commission, become members of a self-regulatory organisation (SRO), and comply with federal securities laws and regulatory obligations.

The SEC’s decision to readjust the established rules was met with uproar from the industry, with various groups and entities criticising the change and proactively working to undo the dealer rule.

Read more: Trade associations file joint lawsuit to oppose SEC dealer rule

Following this outrage, one group of digital asset firms in the US filed a complaint for declaratory and injunctive relief in Texas on 23 April 2024, specifically against the SEC and Gary Gensler himself. 

The official complaint document highlighted that participants from across the digital assets industry had “expressly warned” the regulator of potential harm to the industry as a result of these rules.

This included “stifling markets’ innovative methods for generating liquidity, increasing costs, decreasing access and competition, and even driving many participants from the market altogether,” said the complaint.

The US district court for the Northern Texas district subsequently ruled that the dealer rule should be vacated, highlighting that congress had defined the term ‘dealer’ “against a pre-existing historical backdrop […] indicative of an understanding that dealers have customers”.

The appeal to this decision, made last month (17 January), was one of the last actions taken by Gary Gensler’s SEC administration. However, the new guard – led by Mark Uyeda, interim chair – has been quick to prioritise reversing this move.

Read more: SEC unveils new crypto task force as Uyeda appointed acting SEC chair

Industry groups across the industry have praised this latest move, with expectations high for next steps from the watchdog under the new leadership.

Speaking in an announcement today, Jack Inglis, chief executive of AIMA said that it “welcomed” the news that the watchdog was abandoning its appeal related to the “ill-advised” dealer rule.

He added: “Hedge funds managed by AIMA’s members are not dealers. They do not have customers – a requirement for determining whether a market participant is a dealer […] While today’s decision significantly reduces uncertainty and the potential for market disruption, we urge the Commission to review their existing enforcement practices with respect to the dealer definition so that they are consistent with the court’s ruling.”

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