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Market participants have voiced their concerns over the potential implementation of a more UScentric market structure with regards to how orders are routed in Europe.
Tabled by the European Commission in April as one of a range of suggestions aimed at improving the integration and efficiency of EU capital markets, the European watchdog asked participants how effective they believe the order protection rule is for guaranteeing the best price for clients / investor protection, speed of execution, level of execution fees, split of liquidity, interconnection between trading venues, efficiency of the price formation process, modernising trading protocols and trading.
However, the move has been criticised by participants who suggest the rule is not appropriate for European market structure and would over complicate an already complex landscape.“ We fail to see obvious advantages in changing the European trading landscape to one where best execution is facilitated by a US-style order protection rule – i. e., a system where trades are automatically rerouted to different venues based on the National Best Bid and Offer( NBBO),” said representatives from Norges Bank Investment Management in the firm’ s response to the consultation in June.
“ European markets are regionally fragmented. Forcing connectivity between regional venues that do not offer trading in the same shares would come at cost without immediate benefit.”
Implemented as part of Reg NMS in 2005, the US order protection rule mandates that
Participants voice concern over European implementation of US-style order protection rule
Participants and associations have criticised an April consultation paper which explores how effective the US Reg NMS rule is while also re-tabling VWAP Crossing, reviewing dark trading levels in Europe, and assessing the prospect of 24-hour trading and more.
orders be executed on exchanges that show the best price. Orders are re-routed to other competing venues if it cannot be executed at what is considered the best price.
The European Commission’ s consultation asked participants for their assessment of EU infrastructure to cater for the rerouting of orders to venues offering the best price – as per the requirements of the rule. It also asked respondents to note if they think the geographical positioning of venues would pose an issue, and what the necessary arrangements and costs could be.
Speaking to this in a response released upon the closing of the consultation on 10 June, the Association for Financial Markets in Europe( AFME) argued:“ Any radical changes to microstructure would be highly undesirable and risk portraying the EU as being in a state of constant regulatory flux. Especially at a moment when investors – including those newly attracted to Europe in light of recent geopolitical trends – wish to navigate markets characterised by regulatory stability, predictability and consistency.
“ Such detrimental changes would also burden market participants with considerable implementation and compliance costs.”
52 // TheTRADE // Q2 2025