[author: Aoife Casey]
On June 11, the European Securities and Markets Authority (ESMA) published its final report (ESMA70-156-1035) following a call for evidence on frequent batch auctions, a type of periodic auction trading system for equity instruments under the MiFID II Directive (2014/65/EU) and the Markets in Financial Instruments Regulation (600/2014) (MiFIR).
Applying the provisions of MiFID II, ESMA identified that frequent batch auctions were rapidly gaining market share. Given concerns that the auctions could be used to circumvent the double volume cap, ESMA published a call for evidence in November 2018. The final report contains feedback from the call for evidence and set out ESMA’s analysis of developments in equity trading. Next steps were also highlighted.
ESMA has identified four main characteristics of frequent batch auction trading systems:
Based on the evidence gathered, ESMA’s future work will focus on pre-trade transparency and the price determination process of frequent batch auctions. In addition, ESMA will look at the broader effects of the MiFID II transparency regime, including the general development of the market structure in its upcoming MiFID II review reports.