On 4 December 2025, the European Commission (Commission) published a legislative package on market integration in the EU. The legislative package is central to the Commission’s Savings and Investments Union (SIU) strategy, which aims to create an integrated and connected EU-wide capital market. The Commission considers that the EU financial markets remain significantly fragmented and lack competitiveness. The legislative package therefore aims to simplify the EU regulatory and supervisory framework by moving supervision to the EU level and further harmonising regulatory frameworks to remove barriers for financial market participants to provide cross-border services.

The legislative package proposes changes to different pieces of EU legislation. These changes are contained in three proposals, namely:

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

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.

The remainder of this article provides an overview of the proposed changes.

1. Proposed Market Integration Regulation

Amendments to the ESMA Regulation

The Commission proposes to amend the ESMA Regulation in light of new supervisory mandates and tasks it intends to confer on the European Supervisory Authority, which are further discussed below. The proposed amendments also aim to enhance the use and effectiveness of supervisory convergence tools. Among other things, a new regulatory framework would allow structured cooperation between ESMA and other Member State competent or relevant authorities. ESMA would be able to establish cooperation arrangements tailored to specific sectors and tasks. In addition, ESMA’s scope to issue “no-action letters” would be broadened to address circumstances where applying a legislative act raises significant issues for market participants. The Commission also proposes to give itself the power to adopt an amending delegated or implementing act if ESMA does not provide a draft of these. Finally, the Commission proposes changes to ESMA’s funding and governance provisions to ensure that it can operate effectively under its new powers and tasks.

Amendments to EMIR

Under the proposals,ESMA would become the direct supervisor of significant central counterparties (CCPs). The proposal specifies the process for determining a CCP as significant. Less significant CCPs will remain under national supervision.

Amendments to MiFIR

The Commission proposes to introduce the concept of “Pan-European Market Operators” (PEMOs) in MIFIR. PEMOs, their trading venues, and significant trading venues would come under ESMA’s direct supervision. In addition, the provisions governing the authorisation and operation of trading venues would move from the Markets in Financial Instruments Directive II (MiFID II) to MiFIR. These include the provisions on position management and position reporting by trading venues in relation to commodity derivatives or in derivatives of emission allowances. Shifting these provisions from a Directive to a Regulation would render the rules directly applicable and remove the need for national transposition, thereby reducing the risk of divergences among Member States. The Commission also proposes an amendment to the rules governing consolidated tapes: consolidated tape providers for equities and exchange-traded funds will need to include the identity of the trading venue offering the best bid and offer price, as well as the depth of the trading book. Investment firms would also no longer be required to publish through an approved publication arrangement the transactions in over-the-counter derivatives that they conclude on a third-country trading venue, if this trading venue complies with a number of requirements. This rule existed in non-binding guidance but will now be moved to MiFIR to enhance legal certainty. In addition, market operators and investment firms operating a Multilateral Trading Facility (MTF) or Organised Trading Facility (OTF), will no longer need to make public current bid and offer prices and the depth of trading interests for forward rate agreements or single currency interest rate basis swaps.

Amendments to CSDR

Under the Commission’s proposal, ESMA would become the direct supervisor of significant central securities depositories (CSDs). The proposal specifies the process for determining a CSD as significant. Less significant CSDs will remain under national supervision. The Commission also proposes certain amendments to allow for CSD services using distributed ledger technology (DLT).

Amendments to the CBDR

The Commission’s proposal aims to remove barriers to cross-border operations of investment funds. Among other things, fund managers and management companies must ensure compliance with marketing communication requirements, even when delegating marketing functions, unless they lack control over the function. Member States would no longer be able to impose additional requirements beyond those in the Regulation. The Commission proposes to empower ESMA to address divergent, duplicative, or deficient supervisory actions hindering cross-border marketing of EU Alternative Investment Funds.

Amendments to the DLTPR

The Commission proposes amendments to the DLTPR to increase flexibility and proportionality and expand the regime’s scope. A proposed simplified regime would apply to smaller DLT market infrastructures. In addition, the scope of entities eligible to operate DLT trading venues and settlement systems would be expanded to include authorised crypto-asset service providers (CASPs).

Amendments to MiCA

The Commission proposes to make ESMA the direct supervisor of all CASPs, thereby taking away supervisory powers from the Member State competent authorities (NCAs). Firms providing crypto-asset services without CASP authorisation under MiCA would continue to be supervised by their NCA. However, if crypto-asset services become their main activity, they would be treated as CASPs, and supervision would transfer to ESMA.

2. Proposed Market Integration Directive

Amendments to AIFMD and the UCITS Directive

The Commission’s proposed Directive would amend the UCITS and AIFM frameworks to further harmonise the two regimes. Among other things, the authorisation procedures for UCITS, AIFMs, and management companies will be further harmonised to limit divergence between Member States. The Commission also introduces the new concept of “EU group of management companies or AIFMs”. Such group would comprise of all authorised management companies and AIFMs, as well as investment firms and credit institutions established in the EU. Management companies would be explicitly allowed to use human and technical resources across different entities within the group to conduct business. Another important proposal is the removal of national discretions under both the AIFMD and the UCITS Directive to reduce divergent interpretation or derogation of the rules. Rules on cross-border marketing of funds would be moved to the Cross-Border Distribution Regulation (see above). The Commission also wants to empower ESMA to identify and maintain a list of the largest asset management groups in the EU. At least annually, ESMA would be tasked carry out reviews aimed at removing obstacles to cross-border activities on at least an annual basis.

Amendments to MiFID II

As mentioned above, provisions applicable to trading venues would be transferred from MiFID II to MiFIR. Therefore, these provisions will be deleted from the Directive. Nevertheless, the Commission proposes to retain in MiFID II the authorisation provisions for investment firms operating an MTF or OTF as they depend on the rules governing the authorisation of investment firms.

3. Proposed Regulation on Settlement Finality

The Settlement Finality Directive provides a framework to reduce risks arising from the insolvency of participants in payment systems and securities settlement systems by disapplying certain national insolvency rules. This ensures transactions can be settled safely and collateral is protected. The Commission proposes to convert the Directive into a Regulation to make it directly applicable and eliminate divergent national approaches resulting from Member State implementation. The proposed Regulation maintains the technology-neutral approach to ensure that DLT systems also benefit from its protections. The Commission also proposes to amend the Financial Collateral Directive as the definition of financial collateral under the Directive in relation to DLT will be updated to align with the DLT-related updates introduced under the Regulation.

Next Steps

The legislative package has been submitted to the European Parliament and the Council for consideration and adoption. It is expected that legislative process will take at least one year. The content of the proposal has also been subject to intense debate ahead of its publication given that it would significantly enhance the role of ESMA and reduce the powers of NCAs.  We therefore anticipate intense negotiations on the legislative package.