The TRADE 88 - Q2 2026 | Page 37

[ T H O U G H T L E A D E R S H I P | C B O E E U R O P E ]

EU will likely drive flow away from the region, undermining the EU ' s regulatory objectives and overall competitiveness.

Innovation, not regulatory intervention, is key to growing CLOBs Cboe Europe is a strong advocate for CLOBs- we operate one of the largest in the EU and are always innovating to grow this segment of the market. Yet experience has consistently shown that artificially promoting CLOBs through restrictions on other venues tend to backfire, often diverting flow to more opaque mechanisms. Responsibility for strengthening lit markets should rest with exchanges themselves, supported by a framework that promotes competition, innovation, and investor choice.

One of the most promising avenues for strengthening CLOBs is through greater incorporation of retail order flow. We are doing our part through the recent launch of our own pan-European retail service, offering brokers free of execution of retail orders at or better than the EBBO, helping to channel more retail onto our lit venues. We believe the EU should consider whether retail orders ought to be encouraged to execute on multilateral venues, improving markets for all participants.

Frequent batch auctions: A European success story The growth of FBAs to represent a meaningful share of European equity trading is one of Europe’ s great market structure success stories. As pioneer of the model in Europe, our service was developed in direct response to client demand for a lowimpact execution mechanism that removes the structural advantages of speed while at the same time contributing to price formation and pretrade transparent lit markets. FBAs batch orders over a short, randomised call period before matching them at a single clearing price, with full pre-trade transparency via a displayed indicative price and volume throughout.

A persistent misconception is that periodic auctions are a form of dark trading. This is incorrect. PABs are fully lit, on-venue mechanisms operating under the Mifir pre-trade transparency framework- following the transparency model of closing auctions, which are universally accepted as an important part of market structure. Furthermore, a key argument sometimes advanced against PABs is that they are price-referencing rather than price-forming. Real world data robustly contradicts this.

Assessed against measurable indicators- including multilateral participation rates, broker preferencing levels, offmidpoint order incidence, and price distribution relative to prevailing spreads- Cboe ' s FBA is unambiguously price-forming.

A level playing field for midpoint executions We welcomed ESMA ' s decision to withdraw its Q & A on the application of the tick size regime to FBAs when announcing its Call for Evidence back in April. Midpoint pricing- including where it falls on a half tick- is a widely recognised, valid, and fair price point, and it should be available across all trading mechanisms. When neither buyer nor seller has an urgent need for liquidity, the true midpoint is the fairest price.

Mifir reforms in March 2024 explicitly permitted SI midpoint executions off-tick, and the impact was immediate: offtick midpoint trades rose from approximately 10 % to around 60 % of all SI midpoint trades in French and Dutch equities following the rule relaxation, according to Cboe analysis. To maintain genuine parity between SIs and multilateral venues, midpoint half-tick executions must be clearly codified and permitted for all on-venue mechanisms.

Conclusion ESMA ' s own data confirms it: European equity markets are in good health. The task now is to build on what is working- a competitive, diverse ecosystem that serves investors, advances the EU ' s Savings and Investment Union agenda, and supports the long-term competitiveness of European capital markets.

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