Questions and answers on the market integration package

1. Why is market integration important for the EU economy?

More integrated markets are essential for revitalising the EU's economic strength and ensuring that the Union can achieve its strategic priorities linked to long-term competitiveness, security, and the digital and green transitions.

Deeper integration of the EU's financial markets is not an end in itself, but a means to build a genuine single market for financial services—one that makes access to capital markets simpler, more efficient, and more attractive for both investors and businesses. The reality is clear: no individual Member State possesses an economy or financial system large enough to act as a significant global player on its own. Only by creating a truly integrated financial system can we achieve the scale needed to support a deeper, more liquid market that more efficiently connects the EU citizens' savings with productive investments.

The fundamental aim of integration is to establish a virtuous circle: capital markets become more efficient in providing fair earnings to citizens who, in turn, choose to invest, thus meeting the financing needs of EU businesses wherever they are located.

This increase in efficiency, scale, and participation ultimately boosts competitiveness, helps economic activity to grow, and stimulates job creation across the EU.

2. What is currently holding back the development of a real Single Market for financial services? / What concrete barriers does this package aim to tackle?

The development of a real Single Market for financial services is primarily held back by persistent fragmentation. This fragmentation prevents financial entities from taking advantage of the Treaty freedoms that should be inherent to the Single Market, causing them to miss out on potential economies of scale and efficiency gains. This results in higher costs being passed on to users of financial services.

The concrete barriers that this package aims to tackle cover:

• Fragmentation in trading and post-trading infrastructures: Financial instruments are traded in more than 300 trading venues in the EU. There are currently 14 central counterparties (CCPs) providing clearing services and 32 central securities depositories (CSDs) offering settlement services, including 7 CSDs operated directly by central banks or other public sector entities. This complexity prevents building up scale. In contrast, the US market is more concentrated and specialised, in particular with respect to settlement, with 2 CSDs and 8 CCPs. Moreover, the top five US venues account for 74 % of exchanged trading volumes, whereas in the EU it is only the top 10 venues that capture a similar share (+-75%).
• Divergent rules and burdensome requirements: Financial entities continue to face duplicative, divergent, inconsistent or differently applied requirements across Member States. Additional national rules and divergent interpretations of EU rules (such as MiFID II and AIFMD/UCITSD) can hinder the free movement of capital. For asset managers, this includes remaining barriers to the cross-border distribution of investment funds and operational obstacles for groups operating across the Single Market.
• Fragmented supervision: Diverging supervisory practices create additional barriers to integration. The limited tools and powers available at the EU level to enforce convergence allow these national divergences to persist, increasing the costs of doing business and undermining consistent investor protection. Moreover, despite financial actors operating across the EU, national supervisors may ignore synergies or risks attached to cross-border operations of supervised entities.
• Obstacles to innovation: Regulatory obstacles hinder the uptake of innovative digital technologies, particularly Distributed Ledger Technology (DLT) in trading and post-trading. The existing EU framework for DLT (the DLT Pilot Regime Regulation), which allows market participants to safely experiment with DLT to issue, trade and settle securities, has seen limited uptake due to its restrictive design, including limitations on its scope and scale, which stifles innovation potential.

3. Why is efficient supervision in the Single Market essential, and how is it linked to market integration?

Efficient supervision is a cornerstone of a well-functioning single market for financial services.

Today, divergent national supervisory approaches and inconsistent enforcement increase the costs of doing cross-border business and actively contribute to market fragmentation along national lines. Fragmented supervision, together with national rules and differing interpretations of EU regulation, pose frictions that hinder the free movement of capital. To address this, supervision needs to be more effective, more conducive to cross-border activities, and more responsive to emerging risks.

The goal is to ensure that financial market operators receive the same supervisory treatment regardless of their location across the Union, thereby fostering investors' confidence. Achieving coherence and integration must be pursued in a targeted and proportionate manner, in order to preserve and strengthen financial stability, market integrity, and investor protection. If investors cannot trust the governance and enforcement of rules, they will be reluctant to invest. Therefore, strengthening the supervisory framework is a fundamental pillar to ensure the safety and soundness of the EU financial system, while enabling its further development and integration.

4. What are the existing pieces of legislation that this package is modifying?

Today's package is composed of one Commission communication and three legislative proposals.

A regulation proposal which will amend:

• The European Securities and Markets Authority (ESMA) Regulation
• The European Markets Infrastructure Regulation (EMIR)
• The Markets in Financial Instruments Regulation (MIFIR)
• The Central Securities Depositories Regulation (CSDR)
• The Distributed Ledger technology Pilot Regulation (DLTPR)
• The Markets in crypto-asset Regulation (MiCA)
• The Cross-Border Distribution of Funds Regulation (CBDR)

That regulation proposal will also include targeted amendments, in line with the changes proposed to the ESMA regulation aimed at making EU supervision more efficient, to:

• The Central Counterparties Recovery and Resolution Regulation (CCPRRR)
• The Securities Financing Transactions Regulation (SFTR)
• The Credit Ratings Agency Regulation (CRAR)
• The Benchmark Regulation (BMR)
• The simple, transparent and standardised (STS) securitisation Regulation
• The European Green Bond Regulation (EuGB Regulation)
• The Environmental, Social and Governance (ESG) rating Regulation

The directive proposal will amend:

• The Undertakings for Collective Investment in Transferable Securities (UCITS) Directive
• The Alternative Investment Fund Managers Directive (AIFMD)
• The Markets in Financial Instruments Directive (MiFID)

Finally, today's package includes a proposal for a Regulation replacing the Settlement Finality Directive and amending the Financial Collateral Directive (FCD).

5. What are the benefits for citizens and companies?

This package will make it easier, cheaper, and safer for citizens and retail investors to access investment opportunities across the EU. This is crucial because approximately EUR 10 trillion of EU retail savings are currently held in bank deposits. While safe, these deposits often generate a relatively low return when compared to investments in capital market instruments, which can make it harder for citizens to build wealth.

By removing barriers that fragment capital markets and simplifying cross-border activity, this package will foster competition between financial service providers, reduce costs, and broaden the range of products available to investors. Citizens will benefit from a genuine single market for capital, where investment services are easier to access and operate under the same clear and predictable rules throughout the EU.

For companies, this package strengthens their ability to access a broader and more diverse pool of investors across the EU, reducing their dependence on bank lending and lowering their financing costs. This streamlined access to investment will allow companies to attract capital from anywhere in the EU, regardless of their location, supporting growth, innovation, and job creation. Ultimately, this contributes to enhancing Europe's long-term competitiveness by ensuring that funding can flow more efficiently to where it's needed most in the European economy.

6. What are the benefits for market players and financial institutions?

The package will make it simpler and more cost-effective for market participants and financial institutions to operate across the EU. By removing unnecessary regulatory divergences and duplications, it will enable firms to streamline their operations, reduce compliance costs, and make full use of the single market.

Specifically, new rules on intra-group synergies will facilitate the allocation and sharing of resources, like compliance or IT functions, across entities within the same EU group structure, without triggering complex third-party outsourcing rules.

Greater harmonisation of authorisation, operational and supervisory rules will give firms legal clarity and predictability, allowing them to allocate resources more efficiently, scale up their activities and compete more effectively both within the EU and globally.

More effective passporting will allow firms to offer services and market products seamlessly across Member States without additional national barriers, making it easier to reach new clients and investors. Moreover, the new optional Pan-European Market Operator (PEMO) status will allow groups with trading venues in multiple Member States to operate under a single license, through a single legal entity and under streamlined supervisory arrangements.

A more consistent and coordinated supervisory framework will also make the EU a more stable and attractive place to do business. Stronger supervisory convergence under the European Securities and Markets Authority will ensure a level playing field, more predictable enforcement of the single rulebook and a coherent approach to emerging risks.

Simplified and interconnected market structures, together with support for innovation such as distributed ledger technology, will make operations faster, safer, and more efficient.

Overall, the package will strengthen the competitiveness of Europe's financial sector and create conditions for a more integrated, innovative, and globally attractive market. This enhanced efficiency will help create a virtuous cycle by fostering deeper pools of liquidity, which will ultimately provide better opportunities for investors and more accessible financing for EU companies.

7. What are the benefits for smaller Member States?

Smaller Member States stand to benefit significantly from a more integrated and better-supervised EU capital market. The aim of this package is not to concentrate financial activity in a few major hubs, but to connect all national markets so that savings and investments can flow more freely across the Union. Integration allows firms and investors in smaller markets to access larger and more diverse pools of capital, helping businesses raise funding for growth, innovation, and job creation. By linking local financial ecosystems with the wider EU market, smaller Member States can enjoy the benefits of scale while maintaining vibrant domestic markets that reflect their specific economic strengths.

The integration also ensures that location is no longer a barrier but an opportunity. Companies in smaller or more remote Member States should be able to obtain funding from anywhere in the EU, while households can access a broader choice of secure, affordable and easy to use financial products. Strong supervisory convergence and consistent application of EU rules will ensure equal treatment and investor protection across all Member States, creating a genuine level playing field. In this way, smaller economies can become fully connected to Europe's capital and innovation networks, benefiting from the growth, stability and resilience that come with being part of a single, competitive market for capital.

8. What role will Member States play in implementing and supporting this package?

As clarified from the beginning in our Savings and Investments Union strategy, building more integrated EU capital markets is both a market-driven process and a shared responsibility between the EU, Member States and market participants. Because financial markets and supervision are deeply interconnected across borders, this package can only succeed through joint action.

While the Commission is putting forward measures at EU level to remove barriers created by fragmented financial services rules (e.g., in trading and post-trading), the active involvement of Member States is essential for these reforms to succeed in practice. Member States must support this effort by reducing transposition burdens, simplifying rules, and cutting administrative complexity at the national level. The package already reduces unnecessary national requirements and limits gold-plating, yet Member States remain key to ensuring that the new framework is applied consistently and that no new obstacles are created. Their cooperation will also be vital in aligning national approaches with EU rules and in supporting more coordinated supervision across the Union.

At the same time, many of the conditions for a truly integrated financial market depend on reforms at national level. This dual approach has strong political backing: the Eurogroup, in its March 2024 statement, highlighted such "bottom-up" national measures as a "necessary complement" to EU actions.

This includes improving areas such as taxation, company and insolvency law, and the efficiency of courts and administrative procedures, which influence how easily capital can move across borders. Some of these broader structural barriers will also be addressed through the upcoming Single Market Strategy.

The Commission will work with Member States to identify and implement such reforms, share good practices and support coordination where it brings added value. The Commission can also support joint initiatives by Member States that advance the Savings and Investments Union's goals, provided they are inclusive, respect EU and national competences and align with EU priorities. By working together in this coordinated way, the EU and its Member States can ensure that citizens and businesses everywhere benefit from a more integrated, competitive, and resilient financial system.

9. How does this package contribute to the Commission's simplification and competitiveness agenda?

This package directly supports the Commission's goal to make Europe more competitive and create a more business-friendly environment. It reduces administrative burdens and regulatory complexity by making cross-border activity simpler, faster, and more predictable for companies and investors. The aim is not deregulation, but smarter and more consistent regulation that removes unnecessary complexity and fragmentation. By replacing directives with directly applicable regulations, reducing gold-plating, refining and deleting empowerments for delegated legislation, and streamlining overlapping supervisory arrangements, the package makes it simpler for market participants to operate across borders while ensuring that investors, including retail investors, face the same clear and predictable rules wherever they invest.

For example, the package aims to harmonise rules for trading venues and streamline complex passporting and marketing rules for investment funds (UCITS/AIFs). It also streamlines supervisory processes by expanding ESMA's direct oversight of certain significant cross-border entities in trading and post-trading, reinforcing supervisory convergence tools, and improving coordination between national authorities. This ensures that simpler rules do not lead to weaker protection.

Furthermore, simplification is used as a tool to attract global investment and innovation: measures reforming the DLT Pilot Regime (DLTPR) specifically remove complexity and provide long-term certainty to ensure the EU financial sector can embrace new technologies and remain competitive globally.

In combination, these measures create a framework where markets can operate more efficiently, citizens remain well protected, and the EU's financial system continues to support stability and long-term growth. This is vital because persistent fragmentation implies a huge cost to the EU economy; for financial services alone, the IMF estimates that internal barriers to the single market are equivalent to a tariff of over 100%. By cutting red tape and improving legal clarity, the package helps to reduce these costs, allowing savings to flow more efficiently into productive investments and strengthening the competitiveness and resilience of the EU economy. The most powerful tool of simplification is indeed reducing and removing barriers to the Single Market.

Sector-specific sections:

Trading

10.  How does this proposal contribute to the competitiveness of trading in the EU?

Trading venues are regulated at EU level under the Markets in Financial Instruments Directive (MiFID) and Regulation (MiFIR), which provide the overarching framework for their functioning and supervision. However, today the EU's trading landscape remains highly fragmented along national lines.

This fragmentation persists because, on the one hand, the rules applicable to regulated markets are not fully harmonised at EU level and, on the other hand, operators remain subject to divergent national supervisory practices. This prevents operators active across several Member States from achieving full synergies, scaling effectively, realising efficiencies and passing those benefits on to end clients. As a result, market participants who wish to trade cross-border are forced to navigate a complex environment and rely on multiple intermediaries, which increases transaction costs. Ultimately, this hinders investment flows and leads to less companies tapping EU capital markets for financing. In the end, the EU becomes a less attractive place to trade and list.

To address these challenges, the proposal will harmonise rules for trading venues, eliminating divergent national requirements and "gold plating". Larger cross-border operators also benefit from single EU supervision, removing costs of compliance with multiple and divergent supervisory processes across several Member States.

In addition, the proposal will offer operators of trading venues active in multiple Member States a regulatory toolkit to manage their operations more efficiently in the Union, notably through:

• facilitated intra-group allocation of resources, for those entities that wish to operate or are already operating as a group;
• enhanced and further clarified passporting opportunities for trading venues to provide their services to issuers and investors in other Member States more easily;
• new optional ‘Pan-European Market Operator' (PEMO) status, for those entities that wish to streamline their corporate structure and licenses into a single entity/single license format.

The proposal also clarifies that Member States cannot require operators of trading venues to establish a subsidiary in their territory, in line with the Treaty principles of the Freedom of Establishment, and by clarifying their possibility to resort to branches to serve investors and issuers located in other Member States.

Importantly, the proposal does not prescribe how operators of trading venues should legally or operationally structure themselves. Instead, it offers alternatives for larger operators with an important cross-border footprint in the Union to organise themselves efficiently, operate seamlessly across borders, and ultimately gain scale.

These measures will foster a more integrated, efficient, competitive and, ultimately, more attractive EU trading environment, reducing costs for investors and listing companies and encouraging cross-border investment flows.

11.  How does this proposal contribute to burden reduction/simplification?

Firstly, the fact that rules will be harmonised at EU level will make the life of groups operating in several Member States much easier.

Secondly, this proposal puts forward an innovative solution to allow groups of trading venues active across borders to radically simplify their corporate structure. The PEMO licence will allow such groups to operate as a single legal entity, on the basis of a single licence – something that is not possible on the basis of the current regulatory framework.

Thirdly, transferring supervision of significant trading venues to ESMA will facilitate the cross-border operations of groups of trading venues. This implies reduced paperwork, simplified procedures, and full consistency in supervisory approaches. Furthermore, operators of trading venues will use a fully digital interactive platform to facilitate the submission and subsequent consultation of authorisations and other supervisory documents.

Lastly, a ‘streamlined membership' procedure will allow fast-track membership applications for brokers that are already members of trading venues, thus simplifying the process of multiple memberships across the Union.

12.  What are ‘Pan-European Market Operators'?

Under the current regulatory framework, market operators must obtain separate authorisations for each regulated market they operate—each subject to the oversight of the relevant Member State's competent authority. This means complying with both organisational and operational requirements in every jurisdiction.

This fragmented approach prevents groups operating venues across multiple Member States from streamlining their structures and supervisory arrangements. This increases operational costs and ultimately raises trading costs across the EU.

The new Pan-European Market Operator (PEMO) status will address these inefficiencies by allowing groups with trading venues in multiple member States to opt in to operate under a single license, through a single legal entity and under the supervision of a single supervisor - ESMA.

Importantly, the PEMO regime is optional — it does not replace the existing authorisation requirements for regulated markets but offers a voluntary alternative for operators seeking a more efficient pan-European model.

For trading groups that choose to keep operating as a group of individual entities (subject to individual authorisation), the proposal also provides solutions including more streamlined procedures that will allow them to organise themselves more efficiently within the same group.

13.  Will ESMA supervise all trading venues?

No. ESMA will supervise ‘significant' trading venues. A trading venue will be deemed “significant” if it is important for the EU economy or if, in addition to being significant in size, it has a significant cross-border dimension. This proposal sets out clear criteria to determine the conditions under which a trading venue satisfies such criteria. In addition, ESMA will supervise operators of trading venues that will opt for the PEMO status.

Based on the current estimates, around 9 trading groups would be under ESMA supervision.

14.  Will there be any role for national authorities, when it comes to significant venues?

After agreeing on an adequate timeline for the transfer of responsibilities between national supervisors and ESMA, ESMA will be in charge of supervising the compliance with the organisational and operational requirements for significant trading venues. However, national supervisors will keep a key role as National Surveillance Authorities (NSAs), remaining in charge of market surveillance for markets operated or situated in their Member State. More concretely, national supervisors will be in charge of preventing and detecting possible market abuse cases and ensuring that markets overall function in an orderly manner. To perform these tasks, national supervisors will continue to receive transaction data, retain the possibility to request order book data and, when necessary, to adopt urgent measures, such as to mandate temporary trading halts in emergency situations or suspend financial instruments from trading.

15.  The equity tape is expected to be launched in 2026: why does the Commission already propose changes to the applicable rules?

Consolidated tapes are centralised data feeds that bring together the prices and volumes of financial instruments from trading venues across all Member States into a single stream of information, equally accessible for everybody. By providing information on pricing conditions across EU venues, consolidated tapes empower users to make better informed decisions. They can also improve competition by driving trading to trading venues with better prices and better liquidity.

A well-functioning consolidated tape for equity is therefore an important pre-condition for an integrated and efficient EU trading landscape. To ensure that the consolidated tape fully delivers on its policy objective, it is essential to address its initial design flaws that would considerably curtail its usage as a best-execution tool, i.e. the obligation for brokers to seek the most favourable conditions within the prevailing market environment when they execute their clients' orders.

Therefore, the proposal will (i) increase the depth of the displayed information, (ii) identify the trading venue with the best price, and (iii) display prices offered by systematic internalisers (i.e. investments firm dealing on its own account and executing client orders outside a trading venue) to clients. By implementing these changes, we expect brokers to refine their execution policies, ultimately benefiting end investors and contributing to a more efficient trading landscape in the Union.

Post-trading

16.  What is the CSDR and why is the Commission proposing to amend it?

The Central Securities Depositories Regulation (CSDR) is a key piece of EU financial legislation aimed at harmonising the settlement of securities transactions, the series of processes at the end of which a seller in a securities transaction receives the cash and the buyer receives the security. It ensures safe and efficient securities infrastructure across Member States. It establishes uniform requirements for the authorisation and supervision of central securities depositories (CSDs) that ensure the settlement of securities, enhancing legal and operational certainties in the European financial markets.

The Commission is proposing amendments to the CSDR to tackle persistent inefficiencies and fragmentation that hinder the seamless settlement of cross-border securities transactions.

17.  What are the key changes to the CSDR that the Commission proposes?

The proposed amendments to the CSDR are extensive and multifaceted. Key changes include reducing barriers to the freedom of issuance, by limiting the ability of Member States to impose additional requirements on issuers of securities (e.g. companies raising capital through bonds or shares) and simplifying passporting processes to enhance the provision of cross-border CSD services.

In addition, the proposal aims to address fragmentation in the settlement landscape by introducing the concepts of CSD hubs and spokes. CSDs providing services in several Member States and those processing a high value of settlement instructions relative to all settlement in the EU will act as hub CSDs. They will be required to establish links with one another, while the remaining CSDs acting as spoke CSDs will be required to be connected to at least one of these hubs (to the extent that such a link is not already in place). This improved interconnectedness in the settlement area will facilitate access to all financial instruments issued in EU CSDs.

The use of TARGET2-Securities (T2S), the settlement platform operated by the Eurosystem, is also promoted by requiring EU CSDs that settle in one of the platform's supported currencies to connect to T2S and offer T2S settlement to its participants.

Moreover, the proposal seeks to integrate Distributed Ledger Technology (DLT) into the CSD regulatory framework, updating definitions to make them technology neutral. It also aims to expand the scope of assets that can be used to settle the cash leg of a securities transaction beyond central bank money by including certain tokenised assets.

The amendments also empower ESMA with direct supervisory authority over significant CSDs, introducing structured supervisory fees and procedures. Transparency measures are also proposed, requiring clear pricing and fee disclosures from CSDs, which are intended to increase competition and improve market efficiencies.

These changes reflect the Commission's commitment to evolving financial infrastructure to meet modern needs while safeguarding financial stability.

18.  What is EMIR and why is the Commission proposing to amend it?

The European Market Infrastructure Regulation (EMIR) is a crucial regulatory framework established to enhance transparency, mitigate systemic risk, and strengthen the security of the derivatives market within the European Union. Initially introduced in response to the global financial crisis, EMIR regulates the over-the-counter (OTC) derivatives market and central counterparties (CCPs), ensuring that transactions are reported, and pertinent risks appropriately managed. The regulation mandates clearing of the most standardised and liquid class of OTC derivatives through CCPs (‘clearing obligation'), establishes risk mitigation techniques for OTC derivatives not cleared through CCPs, requires the reporting of all derivatives trades to trade repositories, and outlines requirements for CCPs and trade repositories.

The Commission is proposing to amend EMIR to address ongoing challenges in the supervision of CCPs, by giving ESMA the ability to supervise significant CCPs directly. These amendments are intended to reduce regulatory fragmentation while ensuring the EU's clearing sector remains robust in the face of evolving market dynamics.

19.  What are the key changes to EMIR that the Commission proposes?

The proposed amendments to EMIR focus primarily on strengthening the supervisory framework for CCPs. One of the central changes is giving ESMA direct supervision over significant CCPs. This modification seeks to create a more harmonised approach to supervision, ensuring consistent application of standards across the EU. To this end, new processes are introduced for determining CCP significance. Member States are also provided with the option to appoint ESMA as the CCP's supervisor also for their less significant CCPs. For less significant CCPs, ESMA will become the sole chair of supervisory colleges, facilitating cohesive oversight and regulatory implementation. To promote fair competition and market integration, the proposal also expands ESMA's role in handling open access requests to a CCP or to a trading venue and in approving interoperability arrangements between CCPs.

These amendments are designed to ensure consistent supervision, facilitate efficient market functioning, and bolster financial stability across the EU.

20.  In what way do the proposed changes to the CSDR contribute to promoting innovation and facilitating the use of new technologies in the provision of CSD services?

The proposed changes to the CSDR explicitly accommodate the integration of new technologies, particularly DLT, by modernising key regulatory definitions such as ‘book-entry form' and ‘securities account'. These amendments aim to create a regulatory environment that not only allows but facilitates the adoption of DLT in CSD services while also introducing DLT-specific requirements that ensure that associated risks are appropriately mitigated. By removing legal barriers and ensuring clarity in how these technologies can be applied within the regulatory framework, the amendments will foster innovation, allowing for new products and services in the settlement space.

21.  What is the interaction between the CSDR and the DLTPR in the context of using technologies such as DLT in the provision of CSD services?

The interaction between the CSDR and the Distributed Ledger Technology Pilot Regulation (DLTPR) is essential for creating a coherent ecosystem for financial technology advancement. While the DLTPR provides a safe legal framework for experimentation with DLT in financial services for trading and settlement, the CSDR amendments aim to integrate these experimental advancements into the mainstream regulatory framework as regards settlement. The DLTPR serves as an incubator for innovation, allowing firms to test and scale DLT applications within a regulatory regime with wide discretion, while ensuring essential safeguards.

However, even with today's amendments, the DLTPR will remain a pilot framework, with certain activity-related thresholds reflecting the experimental nature of some business models and allowing a wider set of participants operating thereunder (e.g. CASPs, investment firms). Meanwhile, the amendments to the CSDR will allow for unlimited scale in DLT-based CSD activities within a comprehensive regulatory framework applicable to CSDs that now explicitly accounts for the use of DLT and supports its large-scale deployment. The two frameworks will remain closely connected, with the long-term policy aim of ensuring their integration within a single rulebook.

22.  How will the supervisory framework for CSDs and CCPs be affected by the Commission's proposal?

The supervisory framework for significant CSDs and CCPs will experience a significant overhaul as the Commission's proposal gives ESMA direct supervisory powers over significant CSDs and CCPs. This shift aims to create a more harmonised approach to supervision across the EU, reducing discrepancies between national jurisdictions and enhancing cross-border consistency and activity. This centralised supervision will facilitate the Commission's goal of fostering an integrated market for capital, including in the clearing and securities settlement areas. The proposal will also set clear criteria for what constitutes a significant CSD and significant CCP, providing clarity and structure to the supervisory remit of ESMA.

23.  How does the Commission's proposal determine which CSDs and CCPs are to be deemed significant and thus subject to ESMA supervision?

The Commission's proposal sets clear criteria for determining which CSDs and CCPs are considered significant, warranting direct supervision by ESMA.

For CCPs, these criteria include considerations of the volume of transactions handled, initial margin requirements, default fund contributions, and whether the CCP belongs to a group comprising another EU CCP, a Tier 2 third-country CCP, or a CSD or trading venue for which ESMA is the competent authority.

For CSDs, these criteria include considerations of the total value of securities issued, settled, and maintained in relation to the total in the EU, whether the CSD operates a securities settlement system governed by the law of another Member State, and whether it belongs to a group comprising another EU CSD, or a CCP or trading venue for which ESMA is the competent authority.

The comprehensive criteria ensure that only entities impacting the broader market ecosystem are subject to centralised supervision at EU level, reinforcing harmonisation in supervisory practices and resilience in EU financial markets.

The proposal outlines detailed processes for this determination. Once deemed significant, these entities fall under ESMA's enhanced supervisory framework, intended to provide consistent supervision and better mitigate risks associated with large-scale, systemically important operations.

Based on the criteria set in the Commission's proposal, 15 CSDs and 9 CCPs would fall under centralised supervision by ESMA.

For both CSDs and CCPs, Member States are given the choice to transfer supervisory authority to ESMA even if those CSDs and CCPs do not meet any of the criteria for significance.

24.  In what way will national authorities, such as national central banks, be involved in the supervision of CSDs and CCPs according to this proposal?

The proposal requires ESMA to establish cooperation arrangements and work closely with key authorities, notably central banks who have an important role as overseers of CSDs and CCPs, to supervise significant CCPs and CSDs. Among others, ESMA will conduct supervision leveraging the expertise of, and in cooperation with, national supervisors and central banks of issue.

25. How will the settlement landscape be affected by the Commission's proposal?

The Commission's proposal aims to significantly enhance inter-CSD connectivity by mandating the establishment of links between CSDs. Such links allow one CSD to access the services of another CSD so that its participants can hold, settle, or transfer securities issued or held in the CSD to which a link has been established. As part of this proposal, links are required to be established among those CSDs identified as hubs, and between CSD hubs and spokes. The hubs will act as central nodes of activity, offering streamlined access to securities markets across national borders and reducing transaction costs and complexities.

In addition, CSDs that settle in a T2S-supported currency will be required to connect to the platform and offer its participants the option to settle in T2S. This model is intended to bolster the interconnectedness of EU financial markets, facilitating economies of scale, efficient settlement processes, and wider market participation for both smaller entities and larger financial institutions. By requiring these connections, the amendments strive to reduce fragmentation within the EU's post-trade landscape, facilitating seamless cross-border securities settlement, while taking into account the need for proportionality.

Moreover, the proposal brings the authorisation for interoperable CSD links – whereby CSDs agree to establish mutual technical solutions for securities settlement – under ESMA's remit, ensuring a streamlined and efficient process that prioritises interoperability and communication standards across CSDs. This development promises to enhance market access, liquidity, and efficiency, fostering a more integrated and robust financial ecosystem across the Union.

26.  Is the regime for third-country CCPs affected by the Commission's proposal?

The regime for third-country CCPs under EMIR remains unchanged. The proposal only brings targeted modifications to reflect the new governance structure of ESMA, in particular the creation of the Executive Board and the removal of the CCP Supervisory Committee. This has only to do with procedural matters and does not materially affect the treatment of third-country CCPs providing services within the EU.

27.  What is the Settlement Finality Directive and why is the Commission proposing to amend it and turn it into a Regulation?

The Settlement Finality Directive (SFD) aims to reduce systemic risk arising from the insolvency of participants in payment systems (such as T2) and securities settlement systems (such as those operated by CCPs and CSDs). It was adopted in 1998 and has been amended six times since. The SFD allows payments and securities transactions to be made safely and settled in systemically important payments and securities settlement systems. In particular, it protects systems by disapplying certain national insolvency rules if a party to a transaction becomes insolvent. By doing so, the SFD ensures that payments and security transfer orders become final (i.e. it ensures ‘settlement finality') and netting arrangements are enforceable, even if the instructing party becomes insolvent. The SFD also protects collateral given by the insolvent party in connection to the system and clarifies which law applies in certain cross-border situations.

The Commission proposes turning the SFD into a Regulation (the Settlement Finality Regulation; SFR) to ensure greater harmonisation, ensuring a level playing field and improving legal certainty. The SFR is important for the SIU as it helps reduce cross-border barriers by fostering harmonisation and enhancing legal certainty. Furthermore, it supports innovation, in line with the objectives of the SIU.

28.  What are the key changes that the Commission proposes compared to the existing rules?

Key changes are more legal certainty for digital innovation, a clearer conflict-of-law provision to allow a uniform interpretation by Member States, simplification, formalisation and harmonisation of the process for extending the protections of the SFR to EU participants in third-country systems, harmonisation of the list of eligible participants, as well as eligible financial instruments to ensure that the scope of protection under the SFR is the same across Member States, harmonisation of the designation process and conditions for EU systems, increased transparency, the use of a central database for the submission of information and documents for the designation and registration of systems, as well as a greater harmonisation of settlement finality moments.

29.  In what way do the proposed changes make the legislation more future-proof and technologically neutral?

The proposed changes facilitate innovation by providing clarity on concepts currently used in the SFD as well as facilitating DLT-based systems to be designated under the new SFR subject to certain requirements being met. Also, as the definition of collateral security under the SFD and the SFR is closely linked to the definition of financial collateral under the Financial Collateral Directive (FCD), the definition of financial collateral under the FCD in relation to DLT has been updated to align with the DLT-related updates introduced under the SFR. This enables a level playing field in the protections provided under the SFR irrespective of the technology used for transfer orders. By harmonising definitions, concepts and related requirements, it avoids the proliferation of different national approaches regarding DLT-based systems and therefore supports market integration and innovation, in line with the objectives of the SIU.

30.  Who will benefit from the changes to settlement finality?

System operators, market participants, as well as EU investors will benefit from enhanced legal certainty and harmonisation as provided for by the SFR. The proposed changes will simultaneously strengthen financial stability while ensuring the competitiveness of the EU.

Asset Management

31.  What are the problems with the current rules on the cross-border marketing of funds?

While Directives 2009/65/EC (UCITSD) and 2011/61/EU (AIFMD) establish a harmonised framework for marketing EU investment funds within the Union, the rules and procedures relating to marketing notifications, de-notifications, and pre-marketing remain unnecessarily lengthy, complex and divergent. This complexity continues to hinder the seamless cross-border operation of UCITS and AIFs in the Single Market.

Feedback from market participants confirms that both EU and national requirements still make the passporting and marketing of EU investment funds challenging to navigate. A key reason is that the Directives grant Member States broad discretion, allowing them to impose their own procedures, regulatory fees, IT systems, and other ad-hoc requirements. In addition, where EU rules leave gaps, Member States may introduce national rules. Since the EU framework is largely principle-based (e.g., information must be clear, fair, not misleading, and consistent with pre-contractual disclosures), many Member States adopt detailed and prescriptive marketing rules, which can ultimately influence product design. As a result, AIFMs and UCITS seeking to market funds across the Union must deal with a patchwork of divergent national requirements. This leads to legal uncertainty, increases compliance costs, delays market access, and limits funds' capacity to scale.

32.  How would the automatic passporting based on authorisation for UCITS and AIFMs work?

During the authorisation process, an applicant UCITS should inform its home competent authority of the Member States where it intends to market. The information and documentation submitted as part of the authorisation process (such as the prospectus, key information document and standardised marketing material) will be used to passport the UCITS into those host Member States as from the day of authorisation. This removes the current procedure to prepare separate notification packages for each host Member State after authorisation. Similarly, each AIFM should, during the authorisation process, inform its home competent authority of the EU AIFs it manages, and of the Member States where it intends to market them to professional investors.

On authorisation day, the home competent authority should prepare a letter of authorisation with an Annex listing the host Member States in which the UCITS intends to be marketed, or the AIFM intends to market AIFs. The letter, together with supporting documents and information, will be shared with the relevant host competent authorities through the central ESMA notification system and the relevant UCITS and AIFs can market in those host Member States from that day.

33.  How would ESMA's notification system, referred to as the data platform, for the cross-border marketing of UCITS and AIFs work?

To facilitate information and document exchange between home and host competent authorities and avoid delays caused by bilateral transmissions among competent authorities, ESMA will develop an interactive IT system, referred to as the data platform, serving as a single access point for the cross-border marketing of UCITS and AIFs, including European Venture Capital Funds (EuVECAs), European Social Entrepreneurship Funds (EuSEFs) and European long-term investment funds (ELTIFs).

Through this platform, home competent authorities will be able to share all information and documentation relevant to the cross-border marketing of UCITS and AIFs with the host competent authorities. Host competent authorities will receive immediate notification via the platform and will have direct access to all relevant documentation. Any subsequent material changes to the documentation, as well as de-notifications relating to UCITS and AIFs, should also be shared by the home competent authority via the platform. To reduce the administrative burden linked to translation, the platform will include an automatic translation function, enabling authorities to view all documents in their local language, as needed. Furthermore, the platform will allow home and host competent authorities to interact directly, including when coordinating actions in respect of UCITS or AIFs marketed on a cross-border basis or when issues arise regarding supervisory measures.

34.  Why have the UCITS key investor information document (KIID) provisions been removed from the UCITS Directive?

The PRIIPs Regulation provides that a PRIIPs Key Information Document (KID) is mandatory where a UCITS is distributed to retail investors. The UCITS Directive stipulates that where a PRIIPs KID is made available to retail investors, the requirement to provide a UCITS KIID is fulfilled. Therefore, the practical use of the UCITS KIID remains with professional clients only. However, professional investors do not require a generic UCITS KIID. Thus, the requirement to provide a UCITS KIID where there is no PRIIP KID is no longer necessary. The removal of the UCITS KIID contributes to the Commission's goal of simplification without compromising investor protection.

35.  What would a depositary passport mean in practice?

Currently EU investment funds are required to appoint a depositary that is established in their home Member State. A depositary passport would mean that UCITS and AIFs will be able to appoint a depositary located anywhere in the Union, to the extent that such depositary qualifies as a credit institution authorised under Directive 2013/36/EU or as an investment firm authorised under Directive 2014/65/EU.

36.  Why is the Commission proposing simplified rules for EU groups of UCITS management companies and AIFMs?

Feedback from market participants confirms that asset managers frequently operate within group structures consisting of several AIFMs and UCITS management companies established across the Union. These entities often work in an interconnected manner and commonly allocate management functions to other entities within the same group. Such groups may also include credit institutions and investment firms that provide management functions on behalf of AIFMs and UCITS management companies. However, Directives 2009/65/EC (UCITSD) and 2011/61/EU (AFMD) do not recognise the concept of a “group” of UCITS management companies or AIFMs and therefore do not reflect these integrated organisational structures. This means that the intra-group allocation of functions is currently subject to the same stringent delegation requirements as those applicable to third parties (such as due diligence, monitoring and resource assessments). This is disproportionate and inefficient, particularly when the delegate is another EU-authorised asset manager, investment firm, or credit institution within the same group.

To address this, the Commission proposes a simplified framework for EU groups of UCITS management companies and AIFMs. Under this framework, entities within the EU group would be able to share and rely on each other's human and technical resources and allocate functions within the group without being subject to the delegation requirements under the UCITS Directive and AIFMD. UCITS management companies and AIFMs would, however, remain fully responsible for the functions or services carried out by other entities within the group and must ensure that such reliance does not reduce them to mere “letter box” entities.

37.  Will ESMA directly supervise investment funds and fund managers?

No, ESMA will not directly supervise investment funds and fund managers; they will continue to be supervised by national competent authorities.

However, the proposals aim to strengthen ESMA's role in fostering supervisory convergence in the asset management sector and in improving cooperation between home and host competent authorities. ESMA will be given an enhanced supervisory role over large asset management groups by conducting, together with the relevant competent authorities, annual reviews of those groups with a view to identifying and addressing divergent, duplicative, redundant, or deficient supervisory practices and facilitating the seamless operation of those groups. Such annual reviews will involve the analysis of data, information, and documentation already available to ESMA and national competent authorities through existing reporting channels.

ESMA will also be given additional powers to address diverging, duplicative, redundant and deficient supervisory actions hindering the effective use of the exercise of passport rights by investment funds, fund managers and depositaries generally, regardless of their size. In that context, ESMA will, for example, facilitate discussions and mediation among national competent authorities where disagreements on cross-border matters arise and, as a measure of last resort, suspend the right of investment funds, fund managers or depositaries to operate on a cross-border basis.

DLT Pilot regime

38.  Why do you already reopen the distributed ledger technology pilot regulation so soon after its entry into application?

The DLT Pilot Regulation (DLTPR) has been applied since 2023. It has established an EU-wide flexible regime that allows market participants to experiment with the use of DLT for the trading and settlement of financial instruments. However, its uptake remains moderate, with a limited number of approved applicants, despite a growing interest in the market in using DLT for financial services.

The DLTPR was always meant to be an iterative framework responding to and evolving with market needs. The Commission identified clear elements that could be improved to support greater participation in the Pilot and therefore allow for more DLT-based innovation in our financial markets. Since removing barriers to innovation is one of the main elements of the SIU package, the Commission decided to conduct an early review of the Pilot as part of the broader review of trading and post-trading rules contained in today's package to put forward measures that will support tokenisation of financial instruments.

39.  What are the key objectives of the proposed amendments?

The review broadly comprises three sets of amendments: firstly, those that aim to extend its scale and scope; secondly, those that aim to increase the flexibility and proportionality of the framework; and, thirdly, those that aim to address lingering concerns about the durability of the pilot regime. The objective of these amendments is threefold. They should ensure that financial firms benefit from a DLT-adapted framework that can support a variety of business models and technical solutions that leverage DLT. Additionally, the amendments proposed aim at ensuring that participants in the Pilot can scale their operations much beyond the activity limitations foreseen in the current Pilot and invest in setting up DLT market infrastructures without worrying about the framework expiring.

40.  What are the changes proposed to increase the scope and the scale of the DLT Pilot?

The scope of eligible assets, currently limited to shares, bonds and units in collective investment undertakings (UCITS), will be expanded to all financial instruments, regardless of their type, subject to appropriate application of investor protection rules. The scope of eligible participants will also be reviewed to allow crypto-asset service providers (CASPs) to participate in the Pilot, subject to complying with sectoral rules applicable to the activity they opt to pursue under the Pilot.

The scale of the activities covered by the pilot is also significantly increased, with the removal of all existing asset-specific caps (on shares, bonds and UCITS) and a significant increase of the total value of financial instruments a DLT market infrastructure can intermediate under the pilot, raised from €6 billion to €100 billion.

41.  What are the changes foreseen to increase the flexibility and proportionality of the framework?

The proposed review will offer small businesses, servicing up to EUR 10 billion in aggregated market value of DLT financial instruments, the possibility to operate a DLT market infrastructure under a simplified regime, with obligations proportionate to their risk and size.

In addition, the Pilot will allow a wide set of financial entities (investment firms, regulated markets, credit institutions, CSDs and CASPs) to provide individually certain CSD services (DLT notary service or DLT central maintenance), normally only provided by Central Securities Depositories.

Furthermore, the Pilot will allow DLT account keepers with access to central bank money – effectively credit institutions authorised under the Pilot to be top tier custodians – to jointly set up a novel type of market infrastructure. To settle assets between them, these DLT account keepers will need to establish a ‘settlement scheme', a set of mutually agreed rules and standards that ensure robust settlement outcomes, supervised by ESMA against specified requirements. This novel type of a market infrastructure framework, with key roles distributed across several participants, aims to respond to the fact that the benefits of distributed ledgers may be particularly salient where key roles in the post-trading value chain are distributed across multiple regulated entities operating on a common platform, in accordance with pre-agreed standards and protocols.

Finally, the current time limits for the duration of the permissions granted under the pilot will be removed, to guarantee the long-term viability of the pilot regime for participants.

42.  Why is there a need to maintain thresholds in the Pilot? Why not remove them entirely?

The simplified regime is there to ensure that small businesses entering the market for CSD services benefit from a proportionate compliance burden as they scale their services. The requirements of the simplified regime are also often more general in nature, allowing more flexibility in how small Pilot participants comply with their obligations. The threshold applicable to the simplified regime (EUR 10 billion) ensures that the entities benefiting from it are engaging in small scale CSD activity.

The threshold for the regular regime (€100 billion) is a substantial increase from the current pilot thresholds, allowing large scale DLT-based activities to develop under the Pilot. However, given the limited uptake so far, the learnings from the current Pilot are still limited. Moreover, DLT-based infrastructures are still untested on a large scale. Therefore, a threshold, albeit a very high one, remains warranted to ensure that innovation and financial stability concerns are appropriately balanced. Importantly, the Commission will have the ability to amend the Pilot thresholds considering e.g. market developments. This ensures the agile adaptability of Pilot parameters.

Supervision

Direct supervision

43.  Which types of entities will fall under ESMA's direct supervisory responsibility?

Under the proposed amendments, ESMA will assume direct supervision over those financial market infrastructures and service providers whose activities are considered significant for the EU economy or financial stability. This includes significant central counterparties (CCPs), significant central securities depositories (CSDs), significant trading venues, as well as pan-European market operators (and trading venues operated by such PEMOs). Significance will be assessed based on detailed criteria set out in the different sectoral legislation. The criteria include scale, cross-border activity, interconnectedness with other infrastructures or markets, and the potential impact on financial stability.

In addition, all crypto-asset service providers (CASPs) will be authorised and supervised directly by ESMA, reflecting the innate cross-border nature of crypto-asset activities.

 By doing this, the reform introduces a strong element of simplification for entities involved, replacing numerous divergent national procedures with one EU supervisory process. ESMA becomes the single point of authorisation and oversight for CASPs and significant market infrastructures, eliminating duplicative national supervision and reducing administrative burdens. The reform creates a clearer, more predictable supervisory environment for market participants operating across the Union.

44.  What is the Commission proposing regarding crypto-asset service providers under the Market in crypto-asset Regulation (MiCA)?

The amendments to MiCA propose to transfer the supervision of crypto-asset service providers (CASPs) from national competent authorities to ESMA. ESMA will become responsible for the authorisation, ongoing supervision, and enforcement of the MiCA Regulation in relation to CASPs.

Regarding already regulated entities, such as investment firms, that are allowed to provide crypto-asset services without being required to obtain an authorization as a CASP, they would continue to be supervised by the competent authorities that granted them authorisation under other Union acts.

However, if the provision of crypto-asset services becomes their main activity of these entities, the supervision for all their activities will be transferred to ESMA, except for banks, as they are already subject to a highly harmonised supervisory regime and rulebook. Crypto-asset services will be considered to be the main activity of an entity where more than 50% of its total turnover in two consecutive years is generated from the provision of crypto-asset services.

ESMA will also be responsible for conducting market surveillance and the enforcement of the provisions to detect, investigate and sanction market abuse.

The amendment proposes an appropriate transitional period to allow for the smooth transfer of supervisory duties, catering for CASPs already authorised and pending applications still assessed at national level.

45.  How is supervision going to be split between NCAs and ESMA regarding crypto-asset services providers?

There is no split supervision for CASPs. ESMA would be the sole supervisor for CASPs and as such, would exercise all the supervisory powers and be able to take any supervisory measure necessary to carry out its duties, as provided in the ESMA Regulation.

To ensure market integrity and confidence in crypto-asset markets, ESMA would in addition become responsible for the supervision of the MiCA rules to deter, investigate and sanction market abuse for crypto-assets admitted to trading on crypto-asset trading platforms.

National competent authorities may assist ESMA in carrying out its tasks, and cooperation agreements will continue to be in force, but supervision of crypto-asset service providers will be assigned to ESMA.

National authorities' competence will be limited to the supervision of other regulated entities that provide crypto-asset service pursuant to another existing authorisation (e.g. credit institutions, investment firms, E-money institutions, fund managers) but their main activity is not the provision of crypto-asset services. Finally, there is no change in the current supervisory set-up for credit institutions.

46.  Will there be a transition period?  How will you ensure continuity of operations?

During and after ESMA's assumption of direct supervision, cooperation will be organised through tailored arrangements that ensure continuity, transfer of expertise, and operational support. The cooperation arrangements will provide a structured method to manage a gradual and coordinated shift towards EU-level supervision rather than an abrupt replacement of national oversight. The aim is to prevent supervisory gaps, protect ongoing investigations, avoid duplicative requests from firms, and maintain institutional memory while ESMA builds up its own supervisory capacity.

47.  What will cooperation arrangements cover?

Cooperation arrangements are designed to cover different supervisory realities rather than one uniform model:

• First, they apply when national authorities have supervised an entity or activity in the past, but ESMA becomes responsible in the future, requiring transitional solutions and knowledge transfer.
• Second, they apply when other European bodies - such as the ECB in the case of CCPs - hold relevant expertise even though they were not previously competent supervisors.
• And third, cooperation will also be needed in areas where national authorities retain certain functions in parallel, for example local market surveillance or oversight of non-significant entities. ESMA will have the flexibility to tailor arrangements to the specific sector, the nature of the tasks involved and the degree of national involvement required.

48. How will cooperation work?

These arrangements may take different forms depending on the sector and supervisory task, ranging from joint supervisory teams and shared inspections to lighter coordination and information-exchange models. The set up will be defined by ESMA looking at the specific situations. National authorities may assist ESMA in operational tasks, follow its instructions when doing so, and share relevant expertise and data, while ESMA remains fully responsible and accountable for its supervisory decisions. The arrangements will be reviewed over time to reflect ESMA's growing capacity and to ensure efficient and autonomous supervision at Union level. The model is therefore deliberately adaptive and capable of evolving.

Cooperation is not limited to the transition phase. Even after ESMA has taken full charge, national authorities may support ESMA, especially for operational activities or tasks requiring physical presence, local language, or country-specific knowledge. In such cases, ESMA retains final responsibility and accountability.

49.  Are you creating local ESMA presences in Member States, and does this imply a decentralised or duplicated supervisory structure?

The proposal allows ESMA to place staff locally if operational needs, such as sustained onsite work or geographic proximity, make this the most effective solution. Local presence would remain strictly functional, limited, and subject to cost-benefit justification. ESMA would continue to operate as a single EU authority with central decision-making. Establishing arrangements is a practical solution that allows catering for the different situations.

50.  Will ESMA have the same powers over the directly supervised entities?

ESMA will be granted a unified set of supervisory powers that will apply to all entities under its direct oversight. This new approach simplifies and standardizes ESMA's procedures for requesting information, conducting investigations and inspections, and imposing fines and penalties.

The framework aims to increase efficiency, reduce complexity, and provide more predictable and legally certain outcomes. While substantially simplified, the framework remains flexible and allows for tailored procedural rules to be applied in specific sectors where necessary, ensuring technical accuracy and consistency with existing regulations.

51.  What are the proposed changes on supervisory convergence?

We propose three key changes to strengthen supervisory convergence:

1. Streamlined decision-making: we are proposing to transfer individual decisions on supervisory convergence, such as product intervention measures, breach of Union law, binding mediation or decisions related to the new convergence tools, to a new Executive Board. This will ensure that the EU perspective is taken into account, while the Board of Supervisors will have a say through a non-objection procedure.
2. Enhanced convergence tools: we are proposing to upgrade existing tools to make them more effective and easier to use. For example, we are removing ESMA's discretion to launch investigations and issue recommendations in breach of Union law cases. We are also expanding the scope of binding mediation and enabling ESMA to assist competent authorities in reaching agreements, particularly in cross-border situations. The package also clarifies that, in accordance with the Corneli judgement, ESMA must apply Union law. This includes national laws that implement EU Directives, which should be interpreted in a way that is consistent with those Directives.
3. New convergence tools: The amendments introduce new tools to ensure effective supervision of cross-border financial services and increase trust in the passporting system. These include collaboration platforms, which have already proven successful in the insurance sector. New powers will also allow ESMA to require competent authorities to seek its opinion and demand corrective actions in cases of serious supervisory shortcomings, and to suspend an entity's right to provide cross-border services if it has committed a serious infringement of Union law that would compromise financial stability, the integrity of financial markets or consumer protection.

Governance

52.  What are the main changes to ESMA's governance structure?

The proposal introduces a new Executive Board that will replace the current Management Board. The Executive Board will be composed of five independent full-time members and the Chair of ESMA. It will mainly be responsible for supervisory decisions. The members of the Executive Board will also be members of the Board of Supervisors, which will continue to oversee regulatory decisions and general supervisory convergence.

53.  What benefits can be expected from the creation of the new Executive Board?

As opposed to the Management Board, which is composed of members of the Board of Supervisors, i.e. heads of national competent authorities, the new Executive Board is expected to achieve a more effective and impartial decision-making, looking at the European interest. It will also help to promote a more integrated and coordinated approach to supervision across the EU, which will ultimately contribute to a more stable and secure financial system. By having a dedicated body focusing on supervisory decisions and management, ESMA will be able to respond more quickly and effectively to emerging risks and challenges, and to address any inconsistencies or gaps in supervision.

54.  What is the composition of the new Executive Board, and how will its members be appointed?

The Executive Board will consist of the Chairperson of ESMA and five full-time members, who will be appointed through a procedure involving the Commission, Council, and European Parliament. Executive Board members will be subject to strict conflict of interest rules and their mandate will be limited to 5 years with the possibility of an extension of two years. The members will have diverse supervisory experiences and a deep understanding of the sectors under ESMA's supervision. The appointment procedure will ensure that the members of the Executive Board have the necessary expertise and independence to take decisions in the best interests of the EU.

55.  How will the Board of Supervisors and the Executive Board work together, and what will be their respective roles?

The Board of Supervisors will remain ESMA's main body for overall guidance and decision-making on regulatory matters and supervisory convergence, whereas the Executive Board's focus will be on supervisory decisions and management. Both Boards will work closely together and be tied by a system of checks and balances. The Board of Supervisors will have the power to object to certain key supervisory decisions of the Executive Board. The Executive Board members will be members of the Board of Supervisors, bringing their expertise and with a vote on general supervisory convergence matters. The Executive Board will also report to the Board of Supervisors on its supervisory activities twice a year, ensuring that the Board of Supervisors is informed and able to provide guidance and oversight.

56.  How will the proposed changes to ESMA's governance structure impact the role of national supervisors?

National supervisors will continue to play a crucial role in ESMA's governance, as they will remain members of the Board of Supervisors and cooperate with ESMA on supervisory tasks. First, the Board of Supervisors will continue to set overall directions, decide on regulatory matters (level 2 and 3 measures, such as draft regulatory technical standards, implementing technical standards, guidelines, recommendations etc...) and will have the right to object to key supervisory decisions of the Executive Board. Therefore, national competent authorities will remain integral to ESMA's decision-making. Secondly, national competent authorities will support ESMA through cooperation arrangements to carry out supervisory tasks. This will allow ESMA to rely on existing resources during the transition of supervisory powers. The collaboration framework will also ensure the continued integration of national supervisors' expertise, fostering a thorough understanding of market dynamics and complexities across different EU member states, while also promoting a more agile, consistent and coordinated approach to supervision across the EU.

Budget

Fees funding

57.  How are the changes proposed in this package going to be financed?

Implementation of the package would require significant resources and infrastructure development at ESMA. Direct supervision of significant trading venues, central securities depositories and CCPs as well as crypto-assets services providers will be fee-funded by those market participants, although preparatory costs would be covered by the EU budget. The principles applicable to supervisory fees (full cost recovery, proportionality) will be harmonised. For the new activities that are not fee-funded  and as some national supervisors can be in a difficult financial situation, the proposal is changing ESMA's funding contribution key for the new tasks envisaged in the proposal so that national supervisors would pay 50% of ESMA's budget instead of 60%, while the EU budget's contribution will also be at 50% (instead of 40% at the moment).

For more information

Press release