EU Capital Markets Integration Proposal: key proposals and implications for firms
The European Commission has unveiled an ambitious legislative package to reduce fragmentation, simplify cross‑border operations and modernise supervision across the EU’s capital markets. The measures, tabled on 4 December 2025 comprise a “Master Regulation”, a “Master Directive”, and a new Settlement Finality Regulation, together amending core frameworks including MiFIR, EMIR, CSDR, the Cross‑Border Distribution Regulation (CBDR), the DLT Pilot Regime, MiCA, UCITS, AIFMD and MiFID II. The proposals now move into trilogue negotiations with the EU Parliament and Council.
Objectives and scope
The package targets four linked goals:
- enabling further market integration and scale;
- improving supervisory efficiency and convergence;
- facilitating innovation (notably DLT/tokenisation); and
- simplifying rulebooks to reduce administrative burdens and national “gold‑plating”.
It focuses on trading, post‑trading and asset management, where persistent divergences and duplicative national requirements still impede passporting, raise costs and deter cross‑border activity in the EU.
Trading venues and market structure: harmonisation, passporting and the PEMO
A new fully harmonised MiFIR “single rulebook” for trading venues would replace key MiFID II venue provisions, reducing scope for divergent national rules. The Commission proposes a new Title in MiFIR to codify authorisation and operational rules for regulated markets (RMs), and for MTFs and OTFs where appropriate, thereby levelling the field across Member States.
The proposals clarify and expand cross‑border rights. Regulated markets, MTFs and OTFs could provide services across the EU via branch or services passport, including admitting instruments to trading and admitting members from other Member States. The package would limit Member States’ ability to impose extra establishment conditions.
A new “Pan‑European Market Operator” status would allow a single legal entity to operate multiple venues across Member States on one licence, streamlining groups’ corporate structures and supervisory relationships. Where a PEMO acquires an already authorised venue, the venue remains deemed situated in its original Member State for matters not fully harmonised at EU level (e.g., certain transparency or tax issues).
Open access and post‑trade neutrality would be tightened. The rules governing CCP‑venue and venue‑CCP access are revised to prevent unjustified refusals or delays and to prohibit “preferred clearing” where interoperability already exists. Members and participants would also gain a right to designate any EU CSD for settlement of venue trades, reinforcing non‑discriminatory access across the trading/post‑trading chain. Enhancements to the equity/ETF consolidated tape include venue identification at EBBO, deeper order‑book data, and a volume‑weighted closing price constructed across all venues to foster competition and resilience in closing auctions.
Post‑trade and CSDR: connectivity, T2S and DLT‑readiness
The Commission proposes to modernise CSDR to reduce fragmentation, improve settlement efficiency and make the framework technologically neutral. This includes updated definitions (book‑entry, cash and securities accounts) that explicitly accommodate DLT‑based provision of CSD services, and risk‑management standards for settlement in commercial bank money and e‑money tokens. CSDs’ cross‑border frameworks would be harmonised, with requirements to increase inter‑CSD links proportionately to significance and to participate in T2S for relevant currencies, while improving transparency on fees and strengthening reporting (including settlement fails and pricing disclosures by settlement internalisers).
Asset management and fund distribution: “passport on authorisation”, marketing in CBDR, and ESMA convergence powers
To improve passporting for UCITS and AIFs, the package would transfer cross‑border marketing rules out of UCITS/AIFMD and into the CBDR, align and streamline notification/de‑notification, and build an ESMA data platform to host notification documentation, de‑notifications and market access status. Critically, a “passporting upon authorisation” regime would allow UCITS and AIFMs to indicate intended host markets at authorisation and upon home‑state transmission to ESMA’s platform, cross‑border marketing could commence immediately for the selected Member States.
Member State marketing fees and modalities would be centralised in ESMA’s public register, and host‑state powers vis‑à‑vis marketed funds would be codified in CBDR to limit divergence. ESMA’s role would expand, and it would coordinate to remove duplicative or deficient supervisory actions hindering cross‑border marketing, exercise enhanced binding mediation and supervisory convergence tools, and (where necessary) suspend cross‑border marketing rights in serious breach cases. At the manager‑group level, ESMA would identify the largest cross‑border groups and lead annual reviews with NCAs to address supervisory obstacles to cross‑border operations.
DLT and digital market infrastructure: a scaled, durable Pilot and standard‑rulebook alignment
The DLT Pilot Regime would be liberalised. The package raises the aggregate activity cap to EUR 100 billion, removes product‑specific thresholds, permits combined MTF/OTF models as a “DLT trading venue”, introduces a simplified regime for smaller DLT infrastructures (up to EUR 10 billion in recorded instruments), and removes time limits on permissions to address uncertainty. In parallel, amendments to CSDR and related frameworks provide legal certainty for DLT‑based issuance/record‑keeping and settlement, helping firms operate both within and beyond the Pilot as DLT scales.
Supervision: ESMA direct competences and a stronger convergence toolkit
The package would confer ESMA with direct supervision over: significant trading venues with an important cross‑border dimension, PEMOs, significant CSDs, and all CASPs. It also restructures ESMA governance, harmonises fee‑setting principles, and introduces mutual recognition and assistance mechanisms for cross‑border recovery of administrative fines. ESMA’s convergence tools are expanded with broader “no‑action letter” powers, enhanced breach‑of‑Union‑law procedures, mandatory/binding mediation in defined cases, collaboration platforms, and powers to require NCAs to seek ESMA opinions and implement corrective actions where serious supervisory shortcomings are identified.
Transition timing is staggered to allow capacity build‑out: for example, ESMA’s new MiFIR powers begin 12 months after entry into force, with venue supervision transfers and CSDR supervision of significant CSDs generally after 24 months.
Practical implications
The proposals will evolve in trilogues, but the ambition is clear:
- more harmonised trading/post‑trading rules;
- more effective passporting;
- streamlined fund distribution;
- improved DLT pilots;
- EU‑level supervision for important market infrastructures; and
- a more active role for ESMA in encouraging EU-wide convergence.
Firms should continue to track the proposal as it makes its way through the legislative process.
