IOSCO Consults on Concentration of Equities Trading at Close

⦿ Executive Snapshot

• What: IOSCO published a Consultation Report on the evolution of market liquidity and extended trading hours.
• Who: International Organization of Securities Commissions (IOSCO), regulators, trading venues.
• Why it matters: The report addresses growing concentration in equities trading and suggests practices to ensure market resilience amid evolving trading patterns.

⦿ Key Developments

• IOSCO's report highlights the concentration of trading activities at market close, raising concerns about reduced liquidity and increased volatility.
• The consultation report is based on a global stocktake that incorporates feedback from regulators and trading venues.
• Extended trading hours are becoming more common, primarily driven by retail demand, but often characterized by lower liquidity and wider bid-ask spreads.

⦿ Strategic Context

• The evolution of equity market structures necessitates ongoing assessment of market liquidity, especially as trading strategies and technologies develop.
• The interest in extending trading hours reflects broader trends in market participation and liquidity management across jurisdictions.

⦿ Strategic Implications

• Immediate implications include a need for regulators to adapt existing frameworks to address the risks associated with concentrated trading at the close.
• Long-term, the shift towards extended trading hours may reshape market dynamics, necessitating new regulatory approaches and risk management strategies.

⦿ Risks & Constraints

• Potential risks include market manipulation due to reduced liquidity during continuous trading hours and operational challenges for trading venues.
• Competition between trading venues may intensify as they seek to attract participants during extended hours, affecting execution quality and liquidity.

⦿ Watchlist / Forward Signals

• IOSCO invites feedback on the Consultation Report until 21 August 2026, indicating a timeline for stakeholder engagement.
• Future developments to monitor include regulatory responses to the consultation and potential changes in trading practices as market conditions evolve.