Is the DVC a ban in disguise?

If you had asked me last year what the actual impact of the double volume cap (DVC) would be, I would have said that it’s ridiculously complex to operate but wouldn’t matter all that much because it would likely only impact a few stocks. Seems I was wrong, judging by yesterday’s announcement from ESMA. Combining the statistics for January and February 2018, a total of 755 ISINs are going to be capped due to the 4% or 8% thresholds starting 12th March, including 685 ISINs deemed liquid by ESMA. Whilst that is just 2.5% of all equities that ESMA lists in its transparency calculations, it represents a whopping 35% of all the liquid instruments listed, where the DVC matters more.

Yesterday’s announcement will probably give another boost to the growth in periodic auctions, block trading and Systematic Internalisers, as they all provide MiFID II compliant alternatives. But what will happen in six months when the first wave of forced suspensions are lifted? Will trading revert to the old ways and the market manage to stay below the thresholds? Or does this herald a permanent change in market behaviour and a move away from anything related to double volume caps? In which case, you might wonder what the difference is between the DVC and a simple ban.

Leave A Comment

Copyright © 2018 Fidessa Group Holdings Limited. All rights reserved.

The information contained within this website is provided for informational purposes only. Fidessa will use reasonable care to ensure that information is accurate at the time it is made available, and for the duration that it remains on the site. The information may be changed by Fidessa at any time without notice. We also reserve the right to close the website at any time. No representation or warranty, expressed or implied, is given on behalf of Fidessa or any of its respective directors, employees, agents, or advisers as to the accuracy or completeness of the information or opinions contained herein or its suitability for any purpose and, save in the case of fraud, all liability for direct, indirect, special, consequential or other loss or damages of whatever kind that may arise from use of the website is hereby excluded to the fullest extent permitted by law. Any decisions you make based on the information in this website are your sole responsibility and information on the website should not be relied upon in connection with any investment decision.

The copyright of this website belongs to Fidessa. All other intellectual property rights are reserved.

Reproduction or redistribution of this information is prohibited except with written permission from Fidessa.