Trading is the process through which financial instruments such as shares, bonds and derivatives are bought and sold between market participants. For shares and bonds, trading generally takes place on secondary markets after the instruments have been issued.
Trading in the European Union
Under EU rules, transactions take place on regulated trading venues, Regulated Markets (RMs) and Multilateral Trading Facilities (MTFs) for most instruments; Organised Trading Facilities (OTFs) for bonds, derivatives and other non-equity instruments; through Systematic Internalisers (SIs), investment firms dealing bilaterally on their own account against clients outside a venue; or over the counter (OTC), directly between counterparties. Execution itself follows different models: continuous order-driven trading via a central limit order book (CLOB), matching buy and sell orders on a price-time priority basis; periodic call auctions; quote-driven trading, where market makers post binding quotes, including request-for-quote (RFQ) protocols common for bonds and derivatives; and non-displayed ("dark") trading under specific pre-trade transparency waivers, subject to an EU-wide cap of 7% of total trading volume.
Many of these trades are then centrally cleared. A central counterparty (CCP) interposes itself between buyer and seller through novation, becoming the buyer to every seller and the seller to every buyer. This is mandatory for many derivatives under EMIR, and increasingly common for cash equities and bonds. This concentrates a web of bilateral exposures into a single net exposure to the CCP for each participant. By lowering counterparty risk and freeing up capital, central clearing allows banks and other participants to trade and provide liquidity at greater scale and lower cost than bilateral markets alone would allow.
By bringing buyers and sellers together and requiring transparency across these venues and mechanisms, financial markets support liquidity and price discovery, allowing prices to reflect supply, demand and available information.
The role of banks in trading and clearing
Banks facilitate trading and clearing for investors and companies across a broad range of financial instruments and markets.
They act as market makers, committing their own capital to post continuous two-way prices and stand ready to buy and sell instruments, supporting liquidity across market conditions, including in less liquid instruments and during periods of market stress. Banks also execute orders on behalf of clients, generally subject to a "best execution" duty under MiFID II requiring them to take all sufficient steps to secure the best possible outcome for clients on price, cost, speed, and the likelihood of execution and settlement. They structure and provide derivatives, covering interest-rate, currency, commodity and other risks, that help businesses and investors manage their financial exposures.
In clearing, banks typically act as clearing members of CCPs: participating directly, posting margin and contributing to default funds, and, through client-clearing arrangements, extending CCP access to clients, such as asset managers and corporates, that do not hold clearing membership themselves.
Through these activities, banks facilitate access to markets, support liquidity and price formation, and contribute to the effective functioning and resilience of EU capital markets.
EBF priorities
Well-functioning secondary markets are essential to the EU financial system: they let investors adjust portfolios, manage financial risk and allocate capital across companies and sectors, while giving issuers confidence that their securities can be bought and sold when needed. Deep, resilient and competitive markets, accommodating different instruments, trading models and investor needs, are essential to strengthening the EU's position in global capital markets.
1. Fulfil the objectives of the Market Infrastructure and Supervision Package (MISP)
Proposed by the European Commission in December 2025, the MISP is the EU's main legislative initiative for strengthening the integration, efficiency and competitiveness of European capital markets. It amends a broad set of EU rules, including MiFID and MiFIR, covering market structure, trading and the supervision of key market participants. The debate on MISP includes the EU equity market structure, in which European policymakers and ESMA are assessing how different trading mechanisms contribute to efficient, competitive and resilient markets, weighing recent market structure developments and their regulatory implications.
To fulfil the MISP's objectives, the EBF advocates for a regulatory framework that:
- Preserves end investor choice and competition in the trading and clearing landscape, so that investors and their intermediaries can continue to choose between venues, execution models and clearing arrangements based on their needs.
- Promotes regulatory simplification and proportionality, allowing banks to deliver the best outcomes for their clients without compromising investor protection.
- Promotes interoperability, particularly in clearing, enabling market participants to choose their preferred CCP independently of the venue where a trade is executed, preserving competition among infrastructures and helping to lower costs.
- Prioritises enforcement over radical reform. This means addressing deviations from established market arrangements, whether bilateral or multilateral, through better supervision and enforcement of existing rules, rather than restructuring the framework itself.
- Promotes competition in market data, including through proper enforcement of the "reasonable commercial basis" (RCB) principle governing how trading venues, systematic Internalizers and consolidated tape providers price pre and post trade data.
2. EMIR 3.0 implementation
The European Market Infrastructure Regulation (EMIR) establishes the regulatory framework for over the counter (OTC) derivatives in the EU. Its latest revision, EMIR 3.0, introduced the active account requirement, in force since June 2025, requiring EU counterparties subject to the clearing obligation to hold an active, operational account at an EU authorised CCP for certain systemically important derivatives, reducing reliance on third country CCPs. Alongside this, current work includes updated technical standards on risk mitigation techniques, including margin requirements, for non-centrally cleared derivatives, with the objective of supporting the safety, resilience and efficiency of European derivatives markets.