ESMA’s Single Volume Cap Shift: What Traders Need to Know in 2025

Europe's markets watchdog tightens the screws—again. The European Securities and Markets Authority (ESMA) is rolling out its single volume cap mechanism, aiming to 'protect' traders from their own enthusiasm (or recklessness, depending on who you ask).

Why now? Because fragmented liquidity and wild swings aren't chaotic enough without regulatory bandaids. The new cap replaces multiple thresholds with one unified limit—streamlining chaos, allegedly.

Behind the curtain: Banks and HFT shops are already gaming how to slice orders thinner than a DeFi stablecoin's collateral buffer. Meanwhile, retail traders get another layer of 'protection' that'll probably just protect them from making profits too fast.

Final thought: If past ESMA interventions are any indicator, this'll either do nothing or create a whole new set of exploitable loopholes—because nothing makes markets safer like rigid rules in a fluid ecosystem.

The European Securities and Markets Authority (ESMA), the EU’s financial markets regulator and supervisor, announced the update of the volume cap system, that will pass from the previous double volume cap mechanism (DVCM) to a “single” volume cap mechanism (VCM) in October, according to the changes introduced by the Markets in Financial Instruments Regulation Review (MiFIR Review).

The new VCM limits at 7% the trading volume under the reference price waiver in the EU, compared to the total aggregated trading volume in the EU over the last 12 months for each equity and equity-like financial instrument. If the limit is exceeded, trading venues will need to suspend the use of the waiver for the concerned instrument for a period of three months.Trading venues must base their decision to suspend the waiver use on the data published by ESMA under the dedicated VCM webpage.

To reduce reporting burden of entities, the future VCM calculations will be based on transaction reporting data collected by National Competent Authorities (NCAs). Therefore, the DVCM reporting system will be decommissioned in January 2026.To reflect these changes, ESMA has submitted for adoption the amendment to the Regulatory Technical Standard 3 (RTS 3). Even in case the RTS 3 revision is not yet in place at that moment, the VCM switch will occur at the announced date.ESMA is currently preparing the new VCM data system. For more details about the formats and templates, please consult the dedicated VCM webpage.

ESMA encourages all interested parties to prepare for the change in requirements in line with the new VCM becoming active in Q4 2025. The first publication of the calculation results is expected for 9 October 2025.

Source: ESMA