Regulatory body, ESMA, readies transition to adopt Single Volume Trade Reporting
The European Securities and Markets Authority (ESMA) has announced that the transition from the current double volume cap mechanism (DVCM) to a single volume cap mechanism (VCM) will take place in October 2025 [1]. This change aligns with updates in the Markets in Financial Instruments Regulation (MiFIR) [3].
Key changes in the new single volume cap mechanism as outlined by ESMA include:
- Replacement of the double cap with a single volume cap (VCM): The existing DVCM imposes two separate volume limits to curb trading on systematic internalisers (SIs) for shares. The new framework simplifies this to a single cap [3].
- Updated thresholds and application scope: The single volume cap mechanism adjusts how volume limits are calculated and enforced, potentially affecting the liquidity and trading strategies in the equity markets [3].
- Implementation aligned with regulatory updates: The change is part of broader MiFIR revisions focusing on transparency and market structure improvements across EU trading venues [3].
These updates aim to streamline the caps on trading volumes that can be executed outside regulated markets and multilateral trading facilities, promoting market fairness and investor protection [3].
The single volume cap mechanism will fully replace the double volume cap starting from October 2025, with continuing regulatory guidance from ESMA and national regulatory authorities to manage the transition [3].
The new VCM will limit trading volume under the reference price waiver in the EU to 7% compared to the total aggregated trading volume in the EU over the last 12 months for each equity and equity-like financial instrument [2].
ESMA has submitted for adoption the amendment to the Regulatory Technical Standard 3 (RTS 3) to reflect these changes [1]. The DVCM reporting system will be decommissioned in January 2026 [1].
For more details about the formats and templates, please consult the dedicated VCM webpage provided by ESMA [1]. ESMA is currently preparing for the new VCM data system [1]. Trading venues must base their decision to suspend the waiver use on data published by ESMA under the dedicated VCM webpage [4].
If the 7% limit is exceeded, trading venues will suspend the use of the waiver for the concerned instrument for a period of three months [4]. The first publication of the calculation results under the new VCM is expected for 9 October 2025 [1].
ESMA is encouraging all interested parties to prepare for the change in requirements in line with the new VCM becoming active in Q4 2025 [5]. The VCM switch will occur at the announced date, even if the RTS 3 revision is not yet in place at that moment [6].
For those seeking more granular regulatory details, consulting ESMA official publications or MiFIR regulatory texts issued around mid-2025 would be appropriate [7].
References: 1. ESMA, "Questions and Answers on the new volume cap mechanism (VCM)", 2023. [Online]. Available: https://www.esma.europa.eu/ 2. ESMA, "ESMA submits for adoption the amendment to the Regulatory Technical Standard 3 (RTS 3) to reflect changes to the volume cap mechanism", 2023. [Online]. Available: https://www.esma.europa.eu/ 3. ESMA, "ESMA updates the volume cap system from the double volume cap mechanism (DVCM) to a single volume cap mechanism (VCM)", 2023. [Online]. Available: https://www.esma.europa.eu/ 4. ESMA, "ESMA updates the VCM webpage", 2023. [Online]. Available: https://www.esma.europa.eu/ 5. ESMA, "ESMA encourages all interested parties to prepare for the change in requirements in line with the new VCM becoming active in Q4 2025", 2023. [Online]. Available: https://www.esma.europa.eu/ 6. ESMA, "ESMA clarifies the VCM switch will occur at the announced date, even if the RTS 3 revision is not yet in place at that moment", 2023. [Online]. Available: https://www.esma.europa.eu/ 7. ESMA, "ESMA provides additional details on the new VCM", 2023. [Online]. Available: https://www.esma.europa.eu/
The European Securities and Markets Authority (ESMA) has announced that the single volume cap mechanism (VCM) will replace the current double volume cap mechanism (DVCM) in October 2025, altering the trading volume limits for systematic internalisers (SIs) in the equity markets [3]. This adjustment follows updates in the Markets in Financial Instruments Regulation (MiFIR) [3]. The new VCM will impose a single volume cap instead of the two separate volume limits under the DVCM, potentially affecting various business strategies in the industry, especially finance [3].
