Is MiFID to blame for thin trading or is everyone on holiday?

Traders have been hit hard by the January blues this year. Already dealing with seasonally low trading volume, the biggest shakeup to European regulation in a decade is making things even worse.

The volume of shares traded in the Stoxx Europe 600 Index was about a quarter lower than the 30-day average, and a third lower in the Euro Stoxx 50 Index. Multiple traders, speaking off the record, said that the start of MiFID II rules is compounding light trading due to the holidays. Trading volume also slumped ahead of the changes, according to two brokers with knowledge of the matter.

Still, with many Europeans still on holiday, it could be too soon to discern the effect of the rules, according to Louis Capital Markets' Jerome Troin-Lajous.

"We’ve seen low volumes since mid-December – a lot of portfolio managers are still away on holiday," said Troin-Lajous, a cross-asset trader in Paris. "Volumes are low today, but it's a bit early to draw conclusions on the impact of the new regulation. We'll have a better idea next week when everyone is back."

At least nine of the 28 European Union members have yet to convert the rules into national legislation or regulations. Valdis Dombrovskis, the EU commissioner in charge of financial-services policy, has said markets could face disruption caused by the late transposition.

Longer-term volume has also been low of late in European equity markets, with quarterly averages close to levels last seen in the aftermath of the dotcom bubble. Market watchers will get more of a clue as to the impact of MiFID rules in the coming days, as they measure daily volume against the same period last year.