The European Securities and Markets Authority (ESMA) has published final guidelines that seek to develop common standards to be taken into consideration by trading venues for the calibration of their circuit breakers and, more generally, to ensure consistent application of the provisions in Article 48(5) of the recast Markets in Financial Instruments Directive (MiFID II).

The final guidelines set out further detail on the parameters that trading venues should consider for the calibration of their circuit breakers, considering as such not only trading halts but also order price collars. The final guidelines also establish that trading venues should immediately make public the activation of a trading halt, the type of trading halt, the trading phase in which it was triggered, the eventual extension and the end of the halt.

ESMA has also published a final report which sets out feedback to its earlier consultation on the guidelines. It describes how the responses to the consultation were taken into consideration when drafting the final guidelines. It describes any material changes to the final guidelines and explains the reasons for this in light of the feedback received. In particular, the final report focuses on the feedback received on the:

  • calibration of mechanisms to manage volatility;
  • dissemination of information regarding the activation of mechanisms to manage volatility on a specific trading venues; and
  • procedure and format to submit the reports on trading halts’ parameters from National Competent Authorities to ESMA.

In particular ESMA states in the final report that:

  • the extension of call auctions due to a price divergence with a pre-determined reference price at the end of the auction period should be considered within the scope of trading halts and therefore be subject to the final guidelines;
  • the purpose of the final guidelines is not to create an exhaustive list of factors but to allow trading venues to take into account the factors that are relevant for them including those not included in the original list;
  • even if order imbalance is the result of market expectations, the trading venue should take into consideration the level of bids and offers in the order book when considering trading halt calibration;
  • it recognises that in some specific cases the duration of the halt could be extended beyond the published maximum period to allow for more in-depth analysis and investigation;
  • it agrees that it may be difficult to compare the number of times that trading halts were triggered between different trading venues and different financial instruments due to the large number of factors to be considered. As a consequence, this parameter has been removed from the final guidelines; and
  • it has updated the template for reporting trading halts parameters and this is reproduced on page 27 of the final report.

View ESMA final report on guidelines on the calibration of circuit breakers and the publication and reporting of trading halts under MiFID II, 6 April 2017