EU Market Integration And Supervision Package

Following its publication on December 4, 2025, market participants, supervisors and legislators have been analyzing the proposals under the EU Market Integration and Supervision Package (MISP). The package’s amendments span 19 separate pieces of EU legislation: 

MASTER REGULATION

• MiFIR (Regulation (EU) 600/2014)
• ESMA Regulation (Regulation (EU) 1095/2010)
• Cross-Border Distribution of Funds Regulation (CBDFR) (Regulation (EU) 2019/1156)
• CSDR (Regulation (EU) 909/2014)
• EMIR (Regulation (EU) 648/2012)
• CCP Recovery and Resolution Regulation (Regulation (EU) 2021/23)
• Distributed Ledger Technology Pilot Regime (DLTPR) (Regulation (EU) 2022/858)
• MICAR Regulation (Regulation (EU) 2023/1114)
• CRA Regulation (Regulation (EC) 1060/2009
• Benchmarks Regulation (Regulation (EU) 2016/1011)
• EU Green Bond Regulation (Regulation (EU) 2023/2631)
• ESG Ratings Regulation (Regulation (EU) 2023/2631)
• Securities Financing Transactions Regulation (Regulation (EU) 2015/2365)- Securitisation Regulation (Regulation (EU) 2017/2402)

MASTER DIRECTIVE

• MiFID II (Directive 2014/65/EU)
• UCITS (Directive 2009/65/EC)
• AIFMD (Directive 2011/61/EU

SETTLEMENT FINALITY REGULATION

• New Settlement Finality Regulation (SFR)
• Financial Collateral Directive (Directive 2002/47/EC)

Some of the main issues in this package include the transfer of various supervisory powers and responsibilities from Member State regulators to the European Securities and Markets Authority (ESMA), a new Settlement Finality Regulation (SFR) and changes for the funds and asset management sector.

The MISP is a lengthy piece of legislation that can be impenetrable, presented as a long list of amending measures and is wide-ranging in both scope and topics. In this note, we aim to highlight the main measures and proposed impacts of the MISP in context and explore some of the most important proposals.

The MISP is one of the main pieces of legislation for financial services emerging from the 2024 Draghi Report and 2025 Competitiveness Compass.

These reports highlighted the following themes:

• Retail participation in financial markets: The Draghi Report highlighted the lack of retail participation in European financial markets, which stands in marked contrast to the U.S. where consumers are more likely to engage in investment activities. One major obstacle for European investors is the absence of a real single capital market.
• Fragmentation: Both the Draghi Report and Competitiveness Compass expressed concerns that fragmentation remains an issue in Europe, with Member States taking different approaches to financial services regulation and making cross-border service provision less smooth than it could be.

The MISP is being introduced in furtherance of one of the horizontal enablers of the EU’s Competitiveness Compass—enabling more efficient financing—and in particular, the Savings and Investments Union. A number of other Competitiveness Compass enablers are also advanced, including cutting red tape, removing barriers to the single market and ensuring better coordination.

WHERE ARE WE AND WHAT’S NEXT IN THE LEGISLATIVE PROCESS?

The European Commission initially proposed finalization of the package through 2027/2028 with full-scale operation in 2029. However, sticking points may emerge which delay implementation. The MISP is intended to be treated as one package and the Commission has stated its unwillingness to see the measure unpicked. However, there are differing views within industry and among Member States as to the desirability of some of the measures. Some aspects, such as the new SFR, have received a positive industry response (subject to technical comments). However, much of the rest of the package intersects with political issues around the powers and responsibilities of European Supervisory Authorities versus national regulators. There is a risk the broader package could be held up while a consensus is reached among the co-legislators on the EU political and organizational changes.

Notably, the European Parliament’s Committee on Economic and Monetary Affairs (ECON) draft Parliamentary reports, published on June 12, 2026 (ECON Draft Reports), mark a significant departure from the original MISP proposal as published by the European Commission on December 4, 2025 (MISP Proposal) as regards the powers of the various authorities. The deadline for amendments to be tabled by Members of the European Parliament is July 16. The ECON vote is tentatively scheduled for December 2026.

The Economic and Financial Affairs Council (ECOFIN), the body responsible for reviewing the MISP Proposal within the Council of the European Union, had not adopted a general approach mandate by the end of the Cyprus Presidency, which finished on July 1, 2026. The Cyprus Presidency did, however, produce a progress report handing over the file to the Irish Presidency, which provides some clarity on its direction of travel.

Deep dive: key aspects of the package

HARMONIZATION AND COMPETITIVENESS

The MISP aims to increase harmonization in European supervision and across regulatory frameworks. Key initiatives in this respect include:

• Transfer of rules from directives to regulations: examples include conversion of the Settlement Finality Directive (Directive 98/26/EC) (SFD) into the SFR, introduction of Title Ia into MiFIR (on authorization and operation of trading venues, formerly housed in the Markets in Financial Instruments Directive (MiFID II)), and the transfer of various provisions (including on marketing communications) from the Alternative Investment Fund Managers Directive (AIFMD)/Undertakings for Collective Investment in Transferable Securities Directive (UCITS Directive) to the Cross-Border Distribution of Funds Regulation (CBDFR).
• Further harmonization of rules: examples include Title Ia, MiFIR, which clarifies the type of activities that trading venues can carry out on a cross-border basis (expanded from MiFID II) and a mandate for ESMA and the European Banking Authority EBA to develop regulatory technical standards (RTS) on various areas to boost consistent application of rules.
• Reduction of gold-plating: examples include Title Ia, MiFIR provisions which remove the scope for gold-plating of requirements for trading venues and, in the asset management industry, a prohibition on gold-plating of marketing requirements under CBDFR to reduce diverging national practices (discussed further below).
• Centralization of supervision: examples include direct ESMA supervision of certain financial market infrastructures (discussed further below) and amendments to ESMA’s supervisory enforcement framework currently applicable to trade repositories, credit rating agencies, benchmark administrators, securitisation repositories and external reviewers for European Green Bonds and ESG ratings providers.

Substantive changes to support competitiveness and remove barriers to market integration include:

• Intra-group arrangements: in some sectors (investment firms, central securities depositories (CSDs) and fund management), intra-group arrangements will no longer be considered as an outsourcing or delegation of functions.
• Access of and to market infrastructure: firms that operate more than one trading venue in more than one Member State (so-called “pan-European market operators”) would be able to do so on the basis of a single license. There would be a streamlining of rules governing access to central counterparty (CCP) services and trade feeds of trading venues to enable open access, with the consequent deletion of similar rules from MiFID II.
• Simplified rules: smaller distributed ledger technology (DLT) infrastructures providing CSD services would be subject to a simplified DLT Pilot Regime and there would be a simplification of the conflicts of interest disclosure obligations for AIFMs and management companies that manage or intend to manage UCITS or AIFs at the initiative of a third-party.
• Exemptions: new exemptions from MiFID II, MiFIR and the Central Securities Depositories Regulation (CSDR) would be introduced for operators of DLT market infrastructure. There would be an exemption from MiFIR post-trade transparency requirements for over-the-counter derivatives that are executed on third-country trading venues.

ESMA SUPERVISION

Centralization of supervision is one of the key pillars of the MISP Proposal. The package proposes a fundamental change to ESMA’s role, moving it from a primarily coordinating body to a substantially empowered EU-level direct supervisor. While the rationale is understandable— more consistent supervision, more accountable regulators and better coordination—it has received mixed responses from both Member States and industry. The ECON Draft Reports of June 12, 2026 have taken account of some of this feedback.

• ESMA’s objectives: the original MISP Proposal included a new ESMA objective of supporting market integration and innovation in the financial sector. ESMA’s existing objective on improving the functioning of the internal market would be expanded to cover enforcement (not only regulation), following logically from its new direct supervisory powers. The objective on international supervisory coordination would be expanded to include exchange of information between local regulators and ESMA.
• However, industry has called for an additional competitiveness objective for ESMA, similar to that of the UK financial services regulators. The ECON Draft Report describes the absence of such a mandate as “the most significant structural deficiency in the Commission’s proposal”. Its draft inserts a new secondary objective into Article 1 of the ESMA Regulation, requiring ESMA to have “particular regard to the competitiveness and international attractiveness of Union capital markets” and to the ability of Union firms to compete with third-country counterparts, subject to the primacy of investor protection, market integrity and financial stability. In ECON’s Draft Report, this is operationalised through a structured competitiveness assessment in ESMA’s RTS and implementing technical standards (ITS) processes (benchmarked against third-country requirements) and a dedicated “competitiveness chapter” in ESMA’s annual report with quantitative indicators—expressly modelled on the UK FCA/PRA secondary competitiveness objective.
• New direct supervisory powers: ESMA currently has a limited direct supervisory role—it directly regulates a limited number of financial undertakings, such as rating agencies, benchmark administrators, third-country central counterparties (CCPs) and trade and securitisation repositories, and produces Level 2 and Level 3 measures if mandated in Level 1 legislation. Under the MISP Proposal, ESMA would directly supervise:
  • Pan-European Market Operators—firms that operate more than one trading venue in more than one Member State on the basis of a single license.
  • Significant EU trading venues—trading venues that are important for the economy of the EU and have a significant cross-border dimension.
  • Significant CCPs—CCPs under the European Market Infrastructure Regulation (EMIR) that meet European thresholds for clearing and default fund contributions or that belong to a group which includes another ESMA supervised entity.
  • Significant CSDs—entities with significant settlement activity and a material cross-border dimension or belong to a group which includes another ESMA supervised entity.
  • Crypto-Asset Service Providers (CASPs)— entities providing services with respect to crypto-assets under the Markets in Cryptoassets Regulation (MiCAR). There is no “significance” requirement here—all pure CASPs would be subject to direct ESMA supervision. This would not, however, extend to other regulated firms—such as credit institutions or investment firms—whose principal business is banking or investment services and which provide crypto-asset services under MiCAR as an ancillary or additional activity. The transfer to direct supervision by ESMA is a major change for entities that are currently subject to local supervision by their own regulators. A phased-in approach would be taken to ensure an orderly transition. Under the current proposal, ESMA would directly supervise approximately eight large CCPs, around 14 of the approximately 35 CSDs, approximately ten trading venue groups and up to 600 CASPs. ESMA currently employs around 300 full-time employees and will need to grow substantially to meet this responsibility.

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