Wednesday, 10 December 2025
The European Commission has presented an extensive legislative package aimed at reducing market fragmentation, easing cross-border activity and modernising supervision across the EU’s capital markets. Announced on 4 December 2025, the initiative consists of a “Master Regulation”, a “Master Directive” and a new Settlement Finality Regulation. Together, these measures amend a wide range of 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 to trilogue discussions with the European Parliament and the Council.
The package is designed to support further market integration, improve supervisory consistency, encourage innovation such as tokenisation, and reduce administrative and national-level duplications. Much of its focus lies in trading, post-trading and asset management—areas where differing national interpretations and overlapping requirements continue to hinder passporting and raise operational costs.
A central element of the proposal is the creation of a harmonised MiFIR “single rulebook” for trading venues, replacing significant parts of MiFID II with uniform EU-wide requirements. The Commission sets out a new Title in MiFIR covering the authorisation and operation of regulated markets, as well as the applicable rules for MTFs and OTFs, with the aim of creating a consistent regulatory baseline across all Member States. Cross-border rights would be expanded, allowing regulated markets, MTFs and OTFs to offer services across the EU through either a branch or a services passport. Member States’ ability to impose additional establishment conditions would be restricted.
A new designation, the Pan-European Market Operator (PEMO), would allow a single legal entity to operate multiple venues in different Member States under one licence. If such an operator acquires an already authorised venue, that venue would remain situated in its original Member State for areas not fully harmonised at EU level, such as certain transparency or tax matters.
The Commission also proposes stricter open-access and post-trade neutrality rules. CCPs and trading venues would face clearer requirements to avoid unjustified refusals or delays in granting access, and “preferred clearing” models would be prohibited where interoperability already exists. Trading participants would gain the right to select any EU CSD for settlement. Improvements to the equity and ETF consolidated tape include mandatory venue identification at EBBO, deeper order-book information and a volume-weighted closing price calculated across all venues.
In the post-trade sphere, CSDR would be modernised to improve settlement efficiency and support technological neutrality. Updated definitions—covering book-entry systems, cash accounts and securities accounts—are written to accommodate DLT-based CSD services. The framework would introduce risk-management requirements for settlement in commercial bank money and e-money tokens. Cross-border arrangements for CSDs would be harmonised, with obligations to increase inter-CSD links in proportion to their significance and to join T2S for relevant currencies. Transparency obligations on fees and enhanced reporting on settlement fails and pricing by settlement internalisers would also be introduced.
For asset management and fund distribution, the package moves all cross-border marketing rules for UCITS and AIFs into the CBDR and introduces a “passporting upon authorisation” system. Under this regime, managers would specify intended host markets at the point of authorisation. Once the home authority transmits the information to ESMA’s central platform, cross-border marketing in those Member States could begin immediately. Notification and de-notification procedures would be aligned, and Member State marketing fees and conditions would be published in ESMA’s public register. Host-state powers would be codified to limit divergence. ESMA’s wider role would include oversight of cross-border supervisory issues, the coordination of reviews of the largest cross-border fund groups, and the ability to suspend marketing rights in cases of serious breach.
The legislative proposals significantly expand the DLT Pilot Regime. The aggregate activity cap would rise to EUR 100 billion and product-specific thresholds would be removed. DLT infrastructures could operate combined MTF/OTF models, and a simplified regime would be available for smaller infrastructures handling up to EUR 10 billion in instruments. Permissions would no longer be time-limited, addressing industry concerns about legal uncertainty. Related amendments to CSDR and other frameworks provide legal clarity for DLT-based issuance, record-keeping and settlement.
Supervisory arrangements would also change. ESMA would assume direct supervision of major trading venues with cross-border relevance, PEMOs, significant CSDs and all crypto-asset service providers. Governance reforms, fee-setting principles and mechanisms for mutual recognition and assistance in recovering administrative fines are included. ESMA would receive broader “no-action letter” powers, enhanced breach-of-Union-law procedures, and binding mediation rights in defined cases. It could also require national authorities to consult ESMA opinions and take corrective action where material supervisory shortcomings appear.
The transition would be phased. ESMA’s new MiFIR powers would apply 12 months after the legislation enters into force, while supervision transfers for venues and significant CSDs would generally follow after 24 months.
Although details may shift during trilogue negotiations, the direction of travel is clear: a more harmonised EU framework for trading and post-trading, streamlined fund distribution mechanisms, expanded and more practical DLT arrangements, greater EU-level supervision of systemically important market infrastructures, and a strengthened mandate for ESMA to drive supervisory convergence. Firms are advised to monitor developments closely as the legislative process moves forward.
Source: EC and CMS
