The proposed Regulation also makes certain targeted amendments to other pieces of EU legislation to align them with the proposed changes to the ESMA Regulation. This includes the Benchmark Regulation and the Securities Financing Transactions Regulation.

  • A proposed Directive amending the:
  • Undertakings for Collective Investment in Transferable Securities (UCITS) Directive
  • Alternative Investment Fund Managers Directive (AIFMD)
  • Markets in Financial Instruments Directive II (MiFID II)
  • A proposed Regulation replacing the Settlement Finality Directive and amending the Financial Collateral Directive.

Please refer to our earlier blog post for an overview of the proposals’ content.

The remainder of this article provides a selected overview of the amendments to the original proposals as suggested by the Irish Council Presidency ahead of negotiating rounds between Member States that took place over the course of September. Please note that the described amendments do not reflect the MISP package in its entirety, and tat a number of its key aspects, such as harmonised and centralized supervision, are not addressed.

  1. MiFIR
  • Equities consolidated tape: The Council Presidency is seeking a compromise between Member States seeking amendments to the data disseminated via the equities consolidated tape and those preferring to defer changes pending commencement of operations by the consolidated tape provider (CTP). Under the proposed compromise, the order book depth displayed on the tape would be reduced from five price levels to two, whilst venue attribution would be retained for those two best-price layers. The volume-weighted closing price would be excluded from the tape.
  • Systematic internaliser (SI) quotes in consolidated tape: The Council Presidency proposes establishing a supplementary data feed containing SI quotes to operate in parallel with the primary equities consolidated tape, thereby enhancing visibility of SI activity. This feed would display the two most competitive quotes published by distinct SIs.
  • SI post-trade transparency: The Presidency proposes strengthening post-trade transparency requirements for SI transactions involving smaller orders, subject to an appropriate deferral period. This delay is intended to mitigate the risk that real-time identification of SIs could expose them to adverse market conditions. The specific duration of the deferral period would be determined through regulatory technical standards (RTS).
  • Frequent Batch Auction (FBA) notifications: There is broad support among Member States for implementing a structured framework requiring trading venues to notify ESMA of their FBA mechanisms and demonstrate that such mechanisms serve a price-formation function. This would operate as a notification regime rather than a formal authorisation process. Following further deliberations, the Presidency proposes clarifying in the recitals that trading venues must submit identical FBA notifications to both ESMA and their national competent authority (NCA) in circumstances where ESMA does not serve as the venue’s competent authority.
  • Operating a regulated market in another Member State: The Presidency proposes that market operators operating a regulated market in another Member State be required to appoint a legal representative in that host Member State. Such representative must be a legal person established in the relevant Member State, expressly authorised to act on behalf of the market operator, and designated as the point of contact for the host NCA in respect of all matters relating to the receipt of, compliance with, and enforcement of decisions or requests for information under MiFIR.

It is understood that certain of the proposed amendments outlined above have not secured unanimous support among Member States, and that deliberations concerning transparency requirements remain ongoing.

  1. AIFMD and UCITS
  • Intra-group delegation: The Commission proposal sought to amend the AIFMD delegation framework by entirely excluding intra-group arrangements from its scope, thereby removing the requirement for fund managers to report such arrangements to NCAs. Given concerns that this approach would diminish regulatory visibility of delegated functions, the Presidency now proposes retaining intra-group arrangements within the delegation framework. A simplified regime would nonetheless apply where both the management company (for UCITS) or alternative investment fund manager (AIFM) and the delegate within the same group are established within the EU. The proposed compromise would further permit sub-delegation and onward sub-delegation within EU groups under this simplified framework. Where any third-country entity is involved in the delegation chain, the standard regime would apply in its entirety.
  • Coordination colleges: The Presidency proposes establishing a coordination college for each of the largest asset management groups operating within the EU. Each college would comprise representatives from ESMA and relevant NCAs, serving as a forum for the exchange of information and supervisory experience, development of a common understanding of the group’s activities and cross-border operations, and identification of material divergences and inconsistencies in supervisory approaches. The framework would apply to groups meeting specified aggregate assets under management thresholds and cross-border activity criteria. Importantly, these colleges would not possess supervisory or decision-making powers, nor would they alter the existing allocation of responsibilities between competent authorities and ESMA.
  • Marketing and advertisement: The MISP proposals include provisions intended to facilitate cross-border marketing of UCITS and alternative investment funds (AIFs) by streamlining passporting procedures and limiting the scope of additional national requirements applicable to marketing communications. However, these proposals have prompted concerns among Member States that, as host jurisdictions, they would have a diminished role in overseeing marketing communications distributed within their territories. The Presidency therefore proposes eliminating requirements for prior notification, review, or approval of marketing communications by host competent authorities, whilst preserving host NCAs’ power to supervise such communications on an ex-post basis. Marketing communications would be submitted to a centralised ESMA-administered data platform upon completion, providing the relevant NCA with direct access. Where an NCA determines that a marketing communication is inaccurate, unfair, unclear, or misleading, it would retain authority to take corrective action. The compromise text specifies the measures available to host NCAs in such circumstances.
  • Depositary passport: The Commission proposal introduces a new option permitting funds, subject to specified conditions, to appoint a depositary established in another Member State. In response to concerns raised by certain Member States that this could impair effective supervision, the Presidency has proposed rendering this option discretionary. Member States electing not to adopt this option would continue to apply their existing national rules governing the appointment of depositaries.
  • Funds managed relative to an index: The Commission proposal sought to extend the elevated 20 percent issuer-concentration limit currently available to index-tracking UCITS to actively managed UCITS managed by reference to an ESMA-recognised index. The rationale was to prevent actively managed UCITS from being compelled to reduce exposure to an outperforming issuer solely because its weighting exceeded the standard limit. However, the Presidency considers that this proposal would give rise to a number of highly technical unintended consequences and has accordingly proposed deferring this extension.
  1. EMIR

The draft compromise includes a limited number of proposed amendments to the MISP amendments to EMIR, the majority of which are technical in nature. These relate to extended timeframes for trading venues to ensure that central counterparties (CCPs) have full operational access to the venue, the procedure for designating a CCP as less significant, and the requirement that any member of ESMA’s Executive Board (rather than the Executive Board Chair specifically) chair supervisory colleges for significant CCPs.

  1. CSDR

The draft compromise includes several proposed amendments to the MISP amendments to CSDR, predominantly addressing governance matters and technical issues. Notable among these, the Presidency proposes provisions enabling Member States to adopt and implement preparedness measures designed to ensure continuity of central securities depository (CSD) services. Additional technical amendments address the third-country regime, communication standards, connectivity requirements, and freedom to use. Regarding freedom of issuance, the Presidency has proposed a recital clarifying that CSDs retain the right to decline to provide services to an issuer based on the law governing the relevant securities.

  1. Distributed Ledger Technology (DLT) Pilot Regime

The Presidency proposes, among other amendments, raising the initial maximum threshold under the DLT Pilot Regime to EUR 300 billion in order to accommodate larger-scale pilot projects. It further proposes empowering the Commission to increase this threshold by way of Delegated Regulation, subject to an absolute ceiling of EUR 500 billion. In determining whether an increase is warranted, the Commission would be required to consider specified criteria, including demonstrated market demand. Additionally, the Presidency proposes that aggregate market value threshold calculations should not aggregate holdings across multiple entities within the same corporate group.

  1. Settlement Finality Regulation (SFR)

The draft compromise includes several amendments to the proposed SFR, which is intended to replace the Settlement Finality Directive. The majority of the Presidency’s proposed amendments are technical in nature, addressing definitional terminology, procedures for designating settlement systems under the SFR, and the process for registering third-country systems. With respect to netting and transfer orders, the Presidency proposes establishing a maximum 24-hour window following the commencement of insolvency proceedings during which orders entered into an in-scope system may lawfully be executed and enforced. This replaces the Commission’s proposed business day-linked deadline, which Member States considered insufficiently precise. A further significant amendment concerns the introduction of grandfathering provisions. Systems currently authorised under the existing regime would be required to re-apply for authorisation within five years of the SFR’s entry into force. However, the proposed amendment would permit competent authorities to proactively reauthorise legacy systems, with an equivalent mechanism for ESMA to re-register third-country systems.

Next steps

Looking ahead, it is understood that the Irish Presidency aims to secure a Council negotiating position on the MISP package at the Economic and Financial Affairs Council meeting on 9 October in Luxembourg. A meeting of the Council Working Party on Financial Services to consider the near-final negotiating position is scheduled for 28 and 29 September. Several contentious issues remain outstanding, including the allocation of powers between the new Executive Board and the existing Board of Supervisors, as well as the trade and post-trade transparency requirements set out in MiFIR.