The Federation of European Securities Exchanges (FESE) has published its response to ESMA’s Call for Evidence on the market structure of European equity markets. FESE welcomes ESMA’s comprehensive assessment, which provides a timely opportunity to assess evolving market structure trends, identify persistent data quality shortcomings, and explore regulatory improvements to strengthen market transparency, price formation and capital market competitiveness.
A key trend identified in the ESMA analysis is the gradual shift of trading activity away from continuous lit trading towards less transparent and/or accessible execution mechanisms, with the largest proportional increase recorded in systematic internalisers’ activity. As a growing share of trading relies on prices formed on RMs and MTFs without directly contributing to price discovery, preserving robust price formation should remain a central objective of EU market structure policy.
One of the clearest messages emerging from the ESMA call for evidence is the need to improve data quality and transparency in the off-exchange space. Existing shortcomings in transaction reporting and trade flagging limit the ability of regulators, market participants and policymakers to accurately assess market activity, execution quality and market structure developments. Strengthening data quality should therefore be regarded as a priority and a prerequisite for effective supervision, informed policymaking and a sound understanding of how European equity markets are evolving.
Our response also underlines the importance of ensuring balanced competitive conditions across execution models and the need for a more comprehensive view of trading activity in EEA shares, including activity taking place in the UK, the exclusion of which has led to an underestimation of the scale of bilateral and off-venue trading.
As policymakers consider the future of EU equity markets, key priorities should include:
- Better data quality, reporting and transparency in bilateral trading.
- Addressing regulatory asymmetries for more balanced and fair competition.
- Measures to strengthen price formation and execution quality.
- Further analysis of market structure developments and the contribution of different trading models to price discovery.
Read FESE’s full response to the ESMA Call for Evidence on the market structure of European equity markets.
