The European Securities and Markets Authority (ESMA) has issued today a public consultation regarding draft guidelines on trading halts under the Markets in Financial Instruments Directive (MiFID II). MiFID II provides that “Member States shall require a regulated market to be able to temporarily halt or constrain trading if there is a significant price movement in a financial instrument on that market or a related market during a short period and, in exceptional cases, to be able to cancel, vary or correct any transaction.
ESMA is mandated to develop Guidelines on the calibration of those trading halts. The obligation for regulated markets to be able to halt or constrain trading in case there is a significant price movement in a “related market” requires implicitly regulated markets to monitor how trading evolves in those related markets. In that context, ESMA considers necessary to issue Guidelines at its own initiative on how trading halts should be communicated to market participants and other venues.
The proposed Guidelines aim to provide guidance on:
- the calibration of trading halts ;
- the dissemination of information regarding the activation of mechanisms to manage volatility on a specific trading venue; and
- the procedure and format to submit the reports on trading halts’ parameters from National Competent Authorities (NCAs) to ESMA.
ESMA will consider the responses received to this consultation paper with a view to finalising the Guidelines and publishing a final report in Q1 2017.