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.

The post ESMA firms up rules of engagement amid market turbulence appeared first on The TRADE.

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. 

The post ESMA invites successful bidders to participate in next stage of EU bond tape tender appeared first on The TRADE.

The new governance structure has been developed to oversee and manage the operational, regulatory and technological elements of the transition.

Due to the ‘significant’ interconnectedness within the EU capital market, a coordinated approach across the EU, involving authorities, market participants, financial market infrastructures and investors, is desirable, according to the watchdogs.

Among the key elements the governance model seeks to establish is an industry committee, made up of senior leaders and representatives from market players.

This committee will be chaired by Giovanni Sabatini, who has previously served as a member of the European Economic and Social Committee and held roles within International Organisation of Securities Commissions (IOSCO), European Banking Federation (EBF) and European Central Securities Depositories Association (ECSDA).

The governance model also seeks to establish various technical workstreams, focused on the technological adaptations needed to accommodate the transition to T+1.

The watchdogs added that two more general workstreams will also be established to review the scope and the legal and regulatory aspects of these adaptations.

Lastly, a coordination committee will be established, chaired by ESMA and with representation from the EC, the ECB and the chair of the industry committee.

This committee will be tasked with ensuring coordination between the authorities and the industry, advising on any issue that may occur during the transition.

The first meeting of the coordination committee is scheduled for 6 February.

ESMA has suggested 11 October 2027 as the optimal date for the transition to T+1 in the EU, aligning with the UK’s proposed switch and today, 23 January, Switzerland also announced plans to move to T+1 in October 2017, with the date now being a consensus between the EU, Switzerland and the UK.

The post EU watchdogs launch new governance structure to support T+1 transition appeared first on The TRADE.

Interested parties are invited to register and submit requests to participate by 7 February 2025 – after which ESMA will assess these requests against the ‘exclusion and selection criteria’ before successful candidates are invited to submit their official applications. 

​Speaking in its most recent announcement the watchdog reiterated that “the CTP aims to enhance market transparency and efficiency by consolidating trade data from various trading venues into a single and continuous electronic stream”.

Adding: “This consolidated view of market activity should help market participants to access accurate and timely information and make better-informed decisions, leading to more efficient price discovery and trading.” 

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. 

In December 2023, Etrading Software confirmed plans to bid to become the consolidated tape provider (CTP) for both the UK and EU. This followed the announcement that the Bloomberg, MarketAxess and Tradeweb JV was off the table. 

Ediphy has also confirmed its intention to bid for the European fixed income tape, as of last September, as well as also gearing up to apply in the UK. 

In addition, firms FINBOURNE and Propellant have also been involved in industry discussion around potential applications to the bond CTP in Europe and the UK.

Speaking to The TRADE about the launch of the first stage of the CTP selection procedure, Neil Ryan, consultant at FINBOURNE, said: “ESMA’s phased approach to the CTP selection process is a welcome move toward ensuring a robust and effective outcome. The focus on a system that aligns with the technical intricacies of fixed income markets and adapts to their unique requirements is critical.

“The proactive elements of this process are more measured and better attuned to the market’s needs, paving the way for a high-quality consolidated tape at a reasonable price. Prioritising high quality, accurate data is essential – without this, the CT risks undermining its effectiveness and eroding the trust of market participants.”

More to follow…

The post ESMA launches first stage of bond CTP selection process appeared first on The TRADE.

Giovanni Sabatini

Sabatini has a wealth of experience working in securities markets, both in the private and public sector. He has served as a member of the European Economic and Social Committee and held roles within the International Organization of Securities Commissions – IOSCO, the European Banking Federation and the European Central Securities Depositories Association (ECSDA).  

In his role, Sabatini will coordinate the work of the industry, acting as the link between market participants.  

ESMA announced last month that it would prepare for a move to T+1 in the EU by Q4 2027 – in line with the UK. Published in the watchdog’s final T+1 recommendations, ESMA recommends that the migration to T+1 occurs simultaneously across all relevant instruments – with a coordinated approach across the continent “desirable”.   

The watchdog recommends 11 October as the optimal date for the switch   – considering the difficulties of going live of such a substantial project in November and December. The regulator also wishes to avoid the first Monday of October as the transition date, as it is the first Monday after quarter-end.   

The UK taskforce has, too, selected 11 October as the recommended date for the switch – due to be confirmed when the final report is published in January 2025.  

In a report, ESMA highlighted the increased efficiency and resilience of post-trade processes that a move to T+1 would facilitate, “achieving the objective of further promoting settlement efficiency in the EU, contributing to market integration and to the Savings and Investment Union objectives”.   

Shortening the settlement cycle in the EU “will undoubtedly change the way in which markets function today”, the report stated, affecting entities throughout the transaction and settlement chains with varying levels of impact.   

A separate report, published by the T+1 technical group of the UK accelerated settlement taskforce, outlines 43 ‘principal recommendations’, covers critical post-trade activities that firms must be able to complete efficiently in a T+1 environment. They cover the areas of success criteria, settlement, FMIs, static data, corporate actions, securities financing and FX.   

There is also 14 ‘additional recommendations’, which assess environmental issues that need to be addressed if the UK is to maximise the efficiency gains that T+1 could deliver – but are not essential to successful implementation.   

The post ESMA names T+1 lead as 11 October 2027 earmarked for co-ordinated switch with UK appeared first on The TRADE.

Both the idea of an increase in the penalty rates and a change in design of the mechanism were in play – with the latter potentially including progressive rates – under changes to the Central Securities Depositories Regulation (CSDR).

However, the European Securities and Markets Authority (ESMA) said this week that in light of market feedback it would not recommend fundamental changes to the methods for calculating penalties, in its final report on the Technical Advice for the European Commission.

ESMA said it recognised that a significant increase of penalty rates may divert resources from expected investments and costs for the industry in the context of the move to T+1.

Instead, a moderate increase has been recommended, which ESMA said was “in full alignment with the current types of settlement fails and targeting most asset classes.” 

While the highest rate would remain one basis for settlement fails due to lack of liquid shares, there could now be an increase by 50% to 0.75 basis points if the reason is a lack of illiquid shares, bonds other than sovereign bonds and all other financial instruments including ETFs.

ESMA also raised the floor for settlement fail due to a lack of cash.

In addition, the EU watchdog’s technical advice included that, in the absence of an overnight interest credit rate due to the monetary policy of the central bank issuing the settlement currency, other comparable interest rates of the ECB and the relevant central bank could be used to calculate a proxy which a CSD can use to calculate the cash penalties due to lack of cash. 

In order to prevent the accumulation of reference data over time and to ensure the efficient operation of securities settlement systems, ESMA has recommended to amend the relevant Level 2 provisions to allow CSDs to use the oldest available reference price for the calculation of the related cash penalties, where settlement instructions have been matched after the intended settlement date, and that intended settlement date is beyond 40 business days in the past from the matching date.

The post ESMA will not recommend overhaul of penalty mechanism for settlement fails under CSDR appeared first on The TRADE.

Published in the watchdog’s final T+1 recommendations, ESMA recommends that the migration to T+1 occurs simultaneously across all relevant instruments – with a coordinated approach across the continent “desirable”.  

In a report, ESMA highlighted the increased efficiency and resilience of post-trade processes that a move to T+1 would facilitate, “achieving the objective of further promoting settlement efficiency in the EU, contributing to market integration and to the Savings and Investment Union objectives”.  

Shortening the settlement cycle in the EU “will undoubtedly change the way in which markets function today”, the report stated, affecting entities throughout the transaction and settlement chains with varying levels of impact.  

Regarding potential dates, ESMA recommends 11 October 2027 as the optimal date – considering the difficulties of going live of such a substantial project in November and December. The regulator also wishes to avoid the first Monday of October as the transition date, as it is the first Monday after quarter-end.  

ESMA said it will continue to work with the European Commission and the European Central Bank on work related to rules on settlement efficiency, adding that “all actors of the financial system will need to work on harmonisation, standardisation, and modernisation to improve settlement efficiency”.  

It is expected that existing CSDR and settlement discipline regulation will need to be amended, in order to “have the legal certainty and to foster the necessary improvements in post-trading processes”, the watchdog said.  

The move aligns with the proposed move to T+1 in the UK – which was announced in September. Last month, the European T+1 Industry task force voiced support for a co-ordinated move to T+1 in the EU, acknowledging the benefits of an aligned approach across the entire European region, including the EEA, the UK and Switzerland.   

“T+1 will allow EU capital markets to keep up with the evolution of other markets, putting an end to costs linked to the current misalignment of settlement cycles,” the report stated. “This will directly benefit the EU asset management industry, will contribute to the harmonisation of corporate event standards in the EU and will more generally contribute to the competitiveness of EU capital markets.” 

ESMA added that the costs and benefits related to the shortening of the settlement cycle have been difficult to quantify, however the benefits of risk reduction, aligning with global markets and margin savings represent key objectives for the EU capital markets.  

Andrew Douglas, chair of the T+1 Taskforce Technical Group, commented on the announcement, stating: “The UK Taskforce has always promoted a combined migration with UK, EU and CH moving together as our preferred solution and so on behalf of the UK Taskforce, I welcome this announcement of the European migration date for 11 October 2027. 

“We have worked closely with ESMA over the past 12 months sharing our progress and I am confident that this relationship will continue to develop as we look at how we can develop joint migration plans.”

The post EU proposes October 2027 for T+1 switch appeared first on The TRADE.

The European Securities and Markets Authority (ESMA) acknowledged the benefits of reducing settlement times but highlighted how harmonisation, standardisation and modernisation will be needed and will require investments.

Harmonisation within Europe is a top regulatory priority at present as the continent looks to improve its competitiveness on the global stage. Subsequently, ESMA has concluded that in the context of needing an efficient and competitive market “it is urgent to act if the EU wants to avoid prolonging and amplifying the negative impacts of the misalignment with major jurisdictions internationally.”

ESMA noted that Europe would likely need to amend CSDR to mandate a harmonised shortening of the settlement cycle in the EU.

With regards to a timeline ESMA acknowledged the high level of interconnectedness between the EU capital markets and those in other jurisdictions in Europe, highlighting how a coordinated approach across Europe is “desirable”.

The regulator added that alongside other European groups, it considers it “necessary to accelerate every aspect of the technical work needed to pave the way to any future move to T+1 in the EU.” 

ESMA, in close coordination with national competent authorities, and sub-groups from the European Commission and European Central Bank, have therefore agreed to establish a governance structure, incorporating the EU financial industry, as soon as possible to oversee and support the technical preparations of any future move to T+1.  

“In order not to lose momentum, details of the governance structure will follow shortly. It will be important that this governance is inclusive and ensures balanced sectorial and geographical representation,” said ESMA in its statement.

ESMA’s public stance was revealed just a day after the European T+1 Industry Task Force voiced support for a co-ordinated move to T+1 in the EU, acknowledging the benefits of an aligned approach across the entire European region, including the EEA, the UK and Switzerland.   

The task force stated that this followed a range of views being expressed as to whether the date identified for the UK transition, H2 2027, could also be a feasible implementation date for the EU. 

The task force did, however, emphasise that depending on the exact definition of what regulatory, technical and operational changes will be required, a transition period of between 24 and 36 months will be required to accommodate the complexity of the market infrastructure in Europe.  

Established in 2023, the European T+1 Industry Task Force comprises of 21 trade associations involved in European capital markets, bringing together a range of industry stakeholders who would be impacted by a move to T+1 settlement for securities traded and settled in the EU.

The post All signs point towards Europe aligning T+1 move with UK and Switzerland appeared first on The TRADE.

The CTP for shares and exchange traded funds ETFs will initiate in June 2025 with plans for a decision on by the end of 2025.

This in keeping with the previously confirmed timeline wherein ESMA confirmed it would be no more than six months after the launch of the selection procedure for bonds.

“Today’s announcement on the launch dates of the first selection procedures for the CTP for bonds and equities aims to foster a successful competition with multiple solid offers in transparent and fair selection procedures,” said ESMA.

Specifically, the “reasoned decision” on the selected applicant will adhere to the rules applicable to concession contracts (outlined in the Financial Regulation – EU, Euratom 2018/104636), which prescribes the steps and timelines to follow.

Read more: ESMA publishes new public consultations as Mifir review continues

Contract notice and procurement documents will be published on the EU Funding & Tenders Portal on the respective launch dates.

“Prospective applicants are invited to register and familiarise themselves with the Portal. In the coming weeks, ESMA intends to share additional guidance on the assessment of exclusion criteria,” confirmed the watchdog. 

Last December, Etrading Software confirmed plans to bid to become the consolidated tape provider (CTP) for both the UK and EU as the UK’s Financial Conduct Authority and European Securities Markets Authority (ESMA) continued with data consolidation plans.

The move followed news that the Bloomberg, MarketAxess and Tradeweb JV for a CTP bid had been scrapped due to “various developments”.

Following confirmation, it would enter the tender process to become the UK’s consolidated tape provider for fixed income, Ediphy has also confirmed its intention to bid for the European fixed income tape as well.

Last year a JV between major exchanges across Europe announced the incorporation of the new company, EuroCTP, through which the participants aim to bid to become the EU’s equities and ETF consolidated tape (CT) provider.

Read more: Battle lines are drawn over European consolidated tape project

Throughout the application periods, ESMA has confirmed it will be available to field questions from prospective bidders with applicants “granted as much time as possible, within the boundaries of EU procurement rules, to provide details on their projects”.

The post ESMA to pick bond CTP by July 2025 appeared first on The TRADE.

The consultation package includes five key focuses; the standards once approved are set to facilitate consolidated tape provider (CTP) appointment for the EU as well as increased transparency across market factions including more informative pre- and post-trade regimes.

“The new rules also aim to foster efficiency and competitiveness in European financial markets, thanks to streamlined reporting requirements,” said ESMA.

Read more – Will the European equities tape tender process end up as a one-horse race?

The package is specifically focused on: rule amendments for liquidity assessment for equity instruments (transparency and volume cap); new drafts for ‘implementing technical standard’ on SI’s; clear specifications around the equity CTP including data considerations; and the flags to be used in post-trade transparency reports for non-equity instruments. 

In addition, ESMA confirmed that part of the consultation package will include new rules for specifying the organisational requirements of trading venues, “adding new provisions on circuit breakers and with targeted amendments to adapt to the DORA framework”. 

Read more – The TRADE predictions series 2024: Regulation – Mifid/Mifir

ESMA confirmed that they will prepare a final report for submission to the European Commission in December 2024, with the remaining mandates to be submitted in March 2025. 

All comments should be received by 15 September 2024 for sections 3, 4 and 8. For sections 5, 6, and 7 the deadline is 15 October 2024.

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