Structure of European Equity Markets

In its latest consultation on market structure, ESMA examines trends in the equity markets against the backdrop of a profound transformation since MiFID I, driven by the opening up of the market to competition, technical innovations, the diversification of execution methods, and the emergence of new investor needs. In its response, AMAFI emphasizes that:

• The fragmentation of the European stock market is no accident: it is the result of policy choices made since MiFID I to promote competition and innovation.
• The debate must refocus on the public interest: price quality, price formation, market integrity, resilience, and the sovereignty of European oversight.
• The current data do not allow for any conclusions at this stage: a longer analysis period is needed, volatility must be taken into account more effectively, and the accuracy and quality of the reported data must be improved.

AMAFI also warns that any premature reform could drive liquidity out of the EU, even though the latest MiFIR revision has not yet taken full effect.

As a follow-up to this response to ESMA, AMAFI is also publishing a study on the impact of volatility on the distribution of trading flows across execution mechanisms and on changes in liquidity quality. Key takeaways:

– Volatility influences the distribution of trading flows. During periods of stress, the share of continuous trading increases, particularly on regulated markets.
– However, the relative decline in continuous trading persists during quiet periods, even if it is less pronounced. Volatility therefore accounts for only part of the observed trend.
– A decline in market share does not mean a decline in volume. Continuous trading volumes are increasing in absolute terms, but at a slower rate than those of periodic auctions (FBA), systematic internalisers (SI), auctions, and dark trading.
– Liquidity conditions are deteriorating moderately. Spreads are gradually widening in the continuous markets, without any clear structural breakdown. However, the trends observed in the fourth quarter of 2025, particularly on MTFs, warrant close monitoring.

AMAFI also proposes that ESMA establish a European framework for regular monitoring, based in particular on trading volumes, spreads, market depth, market impact, and the contribution of various mechanisms to price formation.