Brexit has led to a substantial reduction in securities trading within the remaining single market, with its long-term impact still evolving. Making use of regulatory data in a regression model, researchers from the European Securities and Markets Authority (ESMA) estimate the evolution of the European share market microstructure from 2019 to 2022, with a specific focus on the impact of the UK withdrawal from Europe, given its pivotal role in equity markets.
Findings underscore a post-Brexit landscape marked by reduced fragmentation, heightened on-exchange trading, and diminished activity on systematic internalizers or over-the-counter. Furthermore, researchers observe that during market stress, fragmentation decreases slightly, confirming “flight-to-transparency” behavior. The results of the analysis are also relevant in the context of European regulatory initiatives such as the Savings and Investments Union (SIU), to create an integrated and competitive financial market.