Article 48(5) of 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.” Under Article 48(13) of MiFID II, the European Securities and Markets Authority (ESMA) is mandated to develop guidelines on the calibration of those trading halts.

ESMA has now published a consultation paper regarding draft guidelines on trading halts under MiFID II. The draft guidelines provide guidance on the calibration of trading halts as per Article 48(13) of MiFID II. In addition, ESMA also proposes guidelines at its own initiative with respect to: (i) the dissemination of information regarding the activation of mechanisms to manage volatility on a specific trading venue; and (ii) the procedure and format to submit the reports on parameters relating to trading halts from Member State national competent authorities (NCAs) to ESMA.

ESMA believes that the draft guidelines on dissemination of information regarding the activation of trading halts are instrumental to the implementation of the obligation for regulated markets to be able to halt or constrain trading in case there is a significant price movement in a financial instrument in a related market established in Article 48(5) of MiFID II. The guidelines on the procedure and format to submit reports on the parameters used for trading halts from NCAs to ESMA are necessary to ensure the consistency and comparability of those reports as requested under Article 48(5).

The deadline for comments on the consultation paper is 6 December 2016. ESMA will consider the responses to the consultation paper with a view to finalising the guidelines and publishing a final report in Q1 2017.

View ESMA consults on MiFID II guidelines regarding trading halts, 6 October 2016

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