Call for Evidence on the market structure of European equity markets

Norges Bank Investment Management (NBIM) is the investment management division of the Norges Bank and is responsible for investing the Norwegian Government Pension Fund Global. At the end of 2025, the Fund held approximately 170 billion Euros in equities issued by European Union corporates. As a long-term investor, NBIM has a strong interest in well-functioning capital markets that facilitate efficient capital allocation and promote long-term economic growth.

We welcome the opportunity to contribute to this Call for Evidence. NBIM trades European equities across all major venues and mechanisms daily and has engaged actively with European equity market structure for many years.

NBIM's mandate is to generate the best possible long-term return for the Fund. That mandate frames how we assess market structure. Well-designed markets drive intermediation costs down to the level justified by genuine services: liquidity provision, risk absorption, and price discovery. At our scale and investment horizon, unnecessary costs compound materially and reduce the returns available to our ultimate beneficiaries.

European equity market structure has evolved since MiFID II took effect. The changes documented in this Call for Evidence, the decline in lit continuous trading, the growth of frequent batch auctions and the expansion of Systematic Internaliser activity are significant. They deserve careful analysis. But they do not, in our assessment, point to a market failure requiring broad intervention. They point to a market adapting to diverse investor needs, in some cases efficiently, and in other cases distorted by regulatory asymmetries.

A well-functioning market is characterized by competition, transparency, and innovation. These features are not abstract. They reflect what we observe as a daily participant in European equity markets.

Competition requires a level regulatory playing field where venues compete on execution quality, not on regulatory advantage. When competition is fair, investors benefit from lower costs, better service, and choice among mechanisms suited to different order types. Where regulatory asymmetries tilt the playing field, the result is not competition but segmentation.

Transparency means that market participants and regulators can observe where liquidity resides and at what price. This is essential for best execution, for regulatory monitoring, and for public confidence in market integrity. The consolidated tape is the key piece of infrastructure that delivers this.

Innovation means that new mechanisms serving genuine investor needs are accommodated, not suppressed. Frequent batch auctions, midpoint execution, and trajectory crossing protocols have emerged because they address real issues. They reduce market impact, eliminate the latency arms race, and lower implicit costs. Regulation should evaluate these innovations on their merits.

We offer three observations on what this means and how to respond.

No evidence that the decline in lit trading has degraded price discovery

The coexistence of competing venues under common transparency rules is not a market failure. Investors benefit from choice of mechanisms. Competition among venues drives quality improvements and diversity can support market resilience.

ESMA’s analysis shows that addressable liquidity has remained at 85–90% of total turnover throughout the period covered and that central limit order books remain dominant by transaction count at approximately 78%. There is no evidence in the available data of a deterioration in price formation quality.

The shift in execution venue reflects legitimate demand. Large institutional orders benefit from mechanisms that reduce market impact and information leakage. This is rational behaviour, not a market deficiency. Where fragmentation becomes a concern is when regulatory asymmetry drives the venue choice. This leads to segmentation, and it is an appropriate target of regulatory attention.

The right response to competitive fragmentation is not to reverse it, but to connect the fragments. The consolidated tape serves as the common information layer connecting competing venues into an integrated market.

We regard an effective consolidated tape as the single most impactful transparency reform available to European policymakers. The consolidated tape should in the future include pre-trade data, attributed to venues, at low latency, with sufficient depth to provide a meaningful picture of available liquidity. A tape meeting these criteria would produce a consolidated European Best Bid and Offer that investors could use as a genuine execution benchmark. It would make venue quality observable and comparable, strengthening competition. It would reduce the information asymmetry between large firms with direct exchange feeds and smaller participants without them.

The Single Volume Cap illustrates the limits of prescriptive intervention. The regulator intended the SVC to protect lit price formation by capping dark trading. In practice, it redirects volume to other mechanisms, notably frequent batch auctions, without improving market quality. NBIM supports its removal.

Sound policy also requires sound data. We share the concern that current trade flag classifications do not reliably distinguish accessible liquidity from contingent, intragroup, or administrative activity. Improving trade flag granularity and consistency should be a prerequisite for structural reform.

Fair competition requires functional equivalence

The growth of midpoint and sub-tick execution reflects genuine investor demand. Frequent batch auctions and SI midpoint matching can reduce transaction costs for non-latency-sensitive institutional participants.

The current framework does not treat these mechanisms neutrally. Investment firms may offer midpoint execution under the SI regime. Multilateral trading venues seeking to offer economically equivalent mechanisms face constraints. This is a venue-category distinction, not a functional one. Order flow migrates to SIs because the regulatory framework provides certain advantages.

Regulation should follow economic function. Midpoint execution delivering genuine price improvement should be available to any venue. Sub-tick activity that does not deliver genuine price improvement should be restricted regardless of venue type. FBA mechanisms performing the same economic function as exchange auctions should face the same regulatory treatment.

The same principle applies to the negotiated transaction waiver. Multilateral venues should be permitted to offer trajectory crossing and percentage-of-volume protocols on the same terms available to SIs and broker networks. The current interpretation creates a structural asymmetry contrary to the objective of creating an integrated market with a ‘level playing field.’

Fair competition must also apply within venues. Where exchanges benefit from regulatory frameworks that protect their price formation role, they should be held to a correspondingly high standard of non-discriminatory access. Member preferencing arrangements that systematically advantage affiliated intermediaries over independent participants are difficult to reconcile with this standard, particularly in the closing auction.

The closing auction should compete on merit as a natural focal point

The primary exchange closing auction is operationally important for NBIM. It determines reference prices for portfolio valuation, performance measurement, and index rebalancing.

The closing auction's strength is self-reinforcing as liquidity begets liquidity. We do not believe it requires regulatory protection. The primary exchange should compete for participation through attractive pricing and service quality.

Alternative closing mechanisms might serve participants with specific execution requirements. ESMA's role should be to ensure that alternative mechanisms are transparent about their pricing methodology.

We note the growing interest in extended and 24-hour trading. Extended sessions are acceptable for genuine out-of-hours needs. They must not be structured to compete with the primary closing auction as an end-of-day price formation event.

Our specific responses to the consultation questions are set out below.

NBIM appreciates the opportunity to contribute to this call for evidence. We remain at your disposal should ESMA wish to discuss any of our views and look forward to continued engagement as this work develops.

Emil Framnes,
Global Head of Equity Trading and Transition

Vegard Vik,
Special Advisor