ESMA launches call for evidence on the structure of European equity markets

ESMA has launched a call for evidence on the market structure of European equity markets as part of its commitment to enhancing transparency and understanding within the equity market framework. The paper aims to provide stakeholders with an objective description of the EU stock market trading landscape, based on transaction reporting data reported under MiFIR between 2022 and 2025. Stakeholders are invited to provide feedback on the identified trends and on the need to address developments identified via legislative or regulatory measures.

Findings

ESMA has found that, overall, the European equity markets function well, with the share of addressable liquidity remaining stable at around 85% of total trading volume, and on-book trading accounting for around 75-80% of trading volume over the period. 

The paper describes the evolution of addressable and non-addressable liquidity, as well as of on-book versus off-book trading between 2022-2025. 

• ESMA observes that lit continuous trading has declined over the period and that this has been offset by the increase in other forms of trading (such as closing auctions, frequent batch auctions and systematic internaliser trading). 

• ESMA also provides an analysis of the distribution of liquidity through different forms of trading on a country-by-country basis. 

• ESMA is interested in feedback on whether the reduction in central limit order book (CLOB) trading is impacting price formation, what the drivers are for choosing one execution mechanism over another, market participants’ ability to access liquidity and issuers’ views on the attractiveness of EU markets for listing.

ESMA provides more detailed analysis on some selected developments, which include a focus on dark trading, periodic auctions and SIs:

• At this stage, ESMA has not observed a switch from the reference price waiver to different pre-trade transparency waivers following implementation of the new single volume cap (SVC) for on-venue trading (although ESMA will continue to monitor this). More generally, ESMA is interested in market feedback on the evolution of dark trading on EU venues and whether there are any issues which may require regulatory intervention. 

• ESMA observes that trading in closing auctions appears concentrated in either small or large trade sizes, that closing auction prices are essential for EU funds (particularly passive funds and those benchmarked to indices) and contribute to price formation. ESMA highlights that closing auctions are of growing importance in EU equity markets, observing surges in activity / volume in closing auction and “trade at close” events. ESMA is interested in the drivers for the growing importance of closing auctions, as well as views on alternative closing mechanisms, the potential impact of 24-hour trading (or extended trading hours) and any structural shifts which stakeholders feel requires regulatory intervention. 

• Frequent batch auctions (FBAs) have continued to evolve since ESMA’s 2019 report on periodic auctions. ESMA is seeking feedback on the functioning of FBAs, whether they contribute to price formation and the drivers for increased volumes being traded through FBAs (with ESMA calling out some indication that trading is moving to FBAs following implementation of the SVC). 

  • ESMA has also confirmed that it has repealed its earlier Q&A which stated that periodic auctions must follow tick-size rules to ensure a level playing field (now that SIs are able to execute off-tick) for trading venues offering periodic auctions in different EU jurisdictions and for those who intend to offer such mechanisms.

  • ESMA has indicated that the evidence collated in response to the CfE could be used by the co-legislators in the Market Integration and Supervision Package (MISP) when considering whether to apply the tick size regime to FBAs.

• ESMA acknowledges that SIs “serve diverse market participants by providing tailored execution solutions”. 

  • ESMA notes the “dual nature” of SI trading, with SIs undertaking a large number of small trades (85% of SI trades), whilst a small number of very large trades drive the bulk of SI turnover. 

  • ESMA has called out that only few SI transactions are flagged with RPRI (price improvement) in transaction reports, suggesting that either price improvements are not provided frequently by SIs, or SIs do not correctly flag relevant trades. 

• ESMA discusses benchmark transactions which constitute negotiated transactions subject to conditions other than the current market price. ESMA suggests that it may issue further guidance on this, in particular:

  • ESMA notes that, when calculating a benchmark for these purposes, the use of transactions from multiple trading venues is allowed;

  • ESMA is seeking feedback on whether it should clarify certain minimum requirements for the calculation of a benchmark, such as that systematically calculating a benchmark based on two (rather than more) transactions would not be within the spirit of the waiver. 

  • ESMA also confirms that SIs can benefit from the waiver and execute order they receive from professional clients at prices different to their quoted prices in the case of benchmark transactions. 

• ESMA discusses examples of “member preferencing”, where orders of preferred members are prioritised in multilateral execution systems over orders from other members (even if these other orders were already resting on the book or (in some instances) could have provided price improvements). 

  • ESMA is interested in feedback on these practices, including on market fairness, competition and investor outcomes, as well as whether such practices should be prohibited or otherwise restricted through regulatory intervention. 

  • ESMA is also interested in hearing about any other practices (for example on RFQs) which may limit competition to the detriment of other investors / members. 

• Section 6 of the ESMA CfE is dedicated to the concept of “addressable liquidity”, with ESMA seeking to ensure that addressable liquidity can be appropriately pinpointed through transparency (RTS 1) data (e.g. by ensuring that the right flags are in place). 

  • For these purposes, ESMA has:

    • Clarified “addressable liquidity trades” as “those relat[ing] to transactions where another investment firm or client could have been a party to the transaction and provided liquidity to the market”.

    • Noted that non-price forming transactions, which are transactions where the price is not determined through interaction of genuine buying and selling interests, may constitute addressable liquidity. 

    • Indicated that certain transactions that are subject to conditions other than the market price (negotiated transactions) may constitute addressable liquidity in the case of portfolio trades and certain benchmark trades. 

  • ESMA is interested in feedback on the above, including which benchmark trades should be considered addressable and price-forming or non-addressable and non-price forming. 

  • ESMA is also asking for feedback on the way addressable and non-addressable trades should be flagged in post-trade transparency reports. This includes questions on whether SI intragroup trades should be treated as non-addressable and non-price forming and should therefore be flagged (although ESMA notes that any change to post-trade reporting flags in RTS 1 would only be made in the medium term, possibly aligned with future changes to transaction reporting flags). 

Timing and next steps

The CfE closes for comments on 30 June 2026, with a feedback statement expected in the second half of 2026.

In addition:

• ESMA’s Q&A on the tick size regime and periodic auction systems (see above) has been deleted with immediate effect. 

• ESMA plans a “deep dive” on areas covered by the CfE, based on qualitative and quantitative data. This will (alongside feedback received to the CfE) be reflected in the feedback statement. 

• ESMA has indicated that it is undertaking an analytical study on the impact of closing auctions on price formation, with the results due to be published “within the year”. 

• ESMA will continue to monitor market developments including the impact of the SVC and of the recent changes to SI quoting and transparency requirements, with the implication being that any additional observations may be taking into account in ESMA’s feedback statement.

Documents

The call for evidence is available here.

ESMA's press release published on 30 April 2026 is available here.