BETTER FINANCE welcomes ESMA’s Call for Evidence on the market structure of European equity markets. While the questions are technical in nature, the key issue for retail investors is not only whether markets offer more execution channels, lower explicit transaction costs or wider access through digital brokers, but whether retail clients can rely on fair, transparent and verifiable execution outcomes.
ESMA’s evidence points to a structural shift in EU equity trading: lit continuous trading has declined, while closing auctions, frequent batch auctions, systematic internalisers and other bilateral or reference-price-based mechanisms have gained importance. Although addressable liquidity appears broadly stable, this may conceal a more qualitative concern: more execution may take place in mechanisms that rely on prices formed elsewhere, while contributing less directly to public price formation.
BETTER FINANCE does not oppose innovation or alternative execution models as such. They may serve useful purposes where they improve execution quality, reduce costs and support market efficiency. However, lower commissions, digital access or narrower displayed spreads should not automatically be treated as evidence of better outcomes for retail investors. Overall execution quality also depends on implicit costs, effective spreads, meaningful price improvement, execution certainty, routing concentration and the robustness of the underlying price formation process.
This matters because retail investors most often access liquidity through brokers, banks, trading apps or other intermediaries. Many may not know whether their orders are executed on a regulated market, an MTF, an SI, an affiliated liquidity provider or a single bilateral market maker. In this context, “free” or low-cost trading should not mask implicit costs, limited venue access, conflicts of interest or reduced exposure to genuine market competition. Particular attention should therefore be paid to arrangements where retail order flow is largely internalised or routed to a single liquidity provider, as these models may make it harder for investors to assess whether they received a genuinely better outcome than would have been available on a lit market.
BETTER FINANCE therefore considers that lit, multilateral and broadly accessible markets should remain the anchor of EU equity price formation. Robust public prices are essential for retail best execution, fund and ETF valuation, issuer confidence, IPO attractiveness and the broader objectives of the Savings and Investments Union. This does not mean prescribing one execution model, but ensuring that bilateral, internalised or reference-price-based mechanisms do not benefit from regulatory or commercial advantages that divert order flow from lit markets without demonstrable benefit for end-investors. In this respect, BETTER FINANCE supports, in principle, ensuring that retail investors have access to at least one meaningful lit-market execution alternative, especially where brokers rely on bilateral or single-venue execution models.
BETTER FINANCE also supports making MiFID II best execution more operational and easier to verify. Retail investors should receive clearer information on routing practices, venue types, use of SIs or affiliated liquidity providers, and the extent to which orders are exposed to multilateral competition. The future Consolidated Tape could play an important role in this respect, provided it supports practical comparison of execution outcomes through reliable venue attribution, timestamps and reference prices.
Finally, ESMA should continue to assess whether current rules create unintended advantages for some execution models, including through tick-size treatment, midpoint execution, reporting practices, transparency obligations or access conditions. The objective should be to ensure a genuine level playing field between execution models, so that competition improves retail outcomes without weakening public price formation.
In conclusion, retail participation in EU capital markets will only be strengthened if lower explicit costs are accompanied by fair execution, robust public prices and safeguards against hidden implicit costs. European equity markets must remain transparent, competitive, resilient and verifiable for end-investors.
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