ESMA puts forward expectations towards effective circuit breaker implementation

12/10/2023

The European Securities and Markets Authority (ESMA), the EU’s financial markets regulator and supervisor, is today publishing a supervisory briefing on circuit breakers, which provides a comprehensive overview of supervisory expectations regarding the calibration of circuit breakers implemented by trading venues (TVs).

The supervisory briefing outlines several principles that national competent authorities (NCAs) should enforce to ensure effective circuit breaker implementation and aims to strengthen convergence among NCAs on circuit breaker calibration methodology, promoting compliance, common understanding and enforcement practices.

The guidance comes in the context of the letter ESMA sent to the European Commission about measures to be implemented in energy markets. Publishing this briefing was deemed necessary in light of recent events such as Russia's military aggression against Ukraine and the May 2022 flash crash which led to, at times, extreme volatility in commodity derivatives and equity markets.

Next steps

NCAs will inform the TVs in their jurisdiction and will follow up on the compliance of trading venues with the expectations set out in the briefing. It is expected that the calibration of circuit breakers throughout the EU will improve and therefore volatility will be better managed.

Vissza a tetejére

The primary objective of the MNB shall be to achieve and maintain price stability. (...) Without prejudice to its primary objective, the MNB shall support the maintenance of the stability of the system of financial intermediation, the enhancement of its resilience, its sustainable contribution to economic growth; furthermore, the MNB shall support the government’s economic policy and its policy related to environmental sustainability, using instruments at its disposal.