On 24 May 2023, the European Securities and Markets Authority (ESMA) published a final report on market outages.

On 28 September 2021, ESMA published a review report on algorithmic trading where it committed to provide guidance on how trading venues should communicate with market participants in case of an outage. As such, on 22 September 2022, ESMA published a consultation paper (CP) on its proposed guidance on market outages.

This final report contains ESMA’s feedback to responses received to the CP and includes the final ESMA opinion on market outages.

ESMA’s feedback to the responses to the CP includes:

  • ESMA has kept its approach to require trading venues to have clear arrangements and procedures in place to ensure the market is provided with a closing price for the trading day. These should be clearly communicated to all market participants. In addition, the trading venue outage plan should address the potential case where the closing auction is affected.
  • ESMA reiterates that it is not mandating trading venues to nominate an alternative venue to run the closing auctions. Nevertheless, trading venues should have the flexibility to, voluntarily, nominate an alternative venue to run its closing auction.
  • Trading venues should be able to postpone the closing auction. Trading venues should set a time limit after which the closing auction should not be held (for example after 6pm) and it should have clear procedures to set an official closing price for the day.
  • Trading venues should inform their members as soon as possible of their intention to postpone the closing auction and give sufficient time for members to prepare. Considering the feedback received, ESMA considers 30 minutes as an appropriate notice period as an example, if the trading venue sets out a cut-off time of 6pm, then the guidance sets out that the latest time they can inform their participants that the closing auction will occur is 5.30pm.
  • ESMA highlights that the current legislative framework under MiFIR does not allow trading functionalities operating under the reference price waiver (RPW) to continue trading instruments whose reference price derives from a trading venue subject to an outage. Should the ongoing MiFIR review result in amendments to the legal framework for the RPW, ESMA may adapt this guidance if it deems appropriate and/or if mandated by the  legislative amendments.
  • ESMA welcomes the support from stakeholders to apply the same principles on communication around outages to non-equity markets and to exempt non-equity trading venues that do not use the central limit order book from certain obligation to publish order information.

The opinion sets out ESMA’s expectations on how Member State national competent authorities (NCAs) should ensure that trading venues have appropriate communication protocols in place, which arrangements should be in place to avoid an outage affecting the closing auction and how trading venues should ensure the market is provided with an official closing price.

Given the guidance in the opinion ESMA expects that NCAs should ensure that trading venues have in place an appropriate outage plan ready to be deployed.