Background

This initiative is designed to support the objectives of the savings and investment union (SIU) strategy¹ by supporting its pillars on market integration and scale and effective supervision (IA, p. 8). The SIU is one of the five horizontal enablers of the Commission's competitiveness compass, the roadmap to boost economic growth, by focusing on enabling more efficient financing (IA, p. 9).

In 2024, former Italian Prime Ministers Enrico Letta and Mario Draghi, each delivered reports on how to improve integration and supervision within the EU. Subsequently, in her 2025 State of the Union address, European Commission President Ursula von der Leyen highlighted the opportunity cost to Europeans resulting from shortcomings in the single market.² Furthermore, the European Parliament adopted a resolution supporting capital markets integration and the Commission's intention to propose measures for a more unified supervisory landscape (IA, pp. 9-10).³

This IA provides a comprehensive overview of the legal context of the proposal, outlining the applicable laws for the trading,⁴ post-trading⁵ and asset management⁶ sectors, as well as the legal framework for innovation⁷ and supervision⁸ (IA, pp. 10-15).  This IA focuses on three sectors within the EU capital market: trading, post-trading and asset management, giving special attention to regulatory barriers challenging the integration of the EU's capital markets. Regarding innovation, the IA focuses on distributed ledger technology (DLT), specifically on participation in the Distributed Ledger Technology Pilot Regulation (DLTPR) (IA, pp. 8-9, 14 and Annexes 7-11).

Problem definition

The IA presents a clear and well-substantiated problem definition based on scientific evidence and feedback from the stakeholder consultation. In accordance with Tool#11 and Tool#13 of the Better Regulation Guidelines (BRG), it includes a problem tree (IA, p. 23), built around three problems caused by two main drivers (IA, pp. 22-47). It also analyses the consequences of the problems for the main stakeholder groups, as recommended by the BRG. The most affected stakeholders are trading venues, investment firms (notably brokers), central securities depositories (CSDs)⁹, central counterparties (CCPs)¹⁰, asset managers, distributed ledger technology (DLTs)¹¹ -based structures, crypto-asset service providers (CASPs), investors, national competent authorities (NCA),¹² the European Securities and Market Authority (ESMA) and the European Central Bank (ECB) (IA, Annex 3, pp. 144-151). The three problems to be tackled by this initiative are:

There are two problem drivers, illustrated in a problem tree (IA, p. 23), underlie the above-described problems:

In accordance with the BRG, the IA presents the problems and their drivers in relation to the most affected stakeholder group. However, the IA does not mention whether all problems and drivers are equally relevant, nor weights the relevance of each problem driver.

The IA highlights that the problem drivers and the problems described lead to one main consequence: a less efficient EU capital market (IA, p. 48). In addition, the IA details that there are increased frictional costs because cross-border activities face undue frictional costs that affect their market structure and discourage competition (IA, p. 48, Annex 4, pp. 154-155). The high market entry barriers for firms from other Member States to compete on a level playing field with local firms have a negative impact on potential economies of scale. As a result, there is a significant home bias (especially in asset management and settlement payment), small-sized providers focused on domestic markets and significant price differences across Member States. According to the IA, this results in a decrease in market efficiency, as less competitive actors/offers can persist in the market, leading to a deadweight loss that negatively affects downstream users (IA, p. 48).

As regards problem magnitude, the IA, inspired by the International Monetary Fund (IMF), estimates that 'internal barriers to the single market are equivalent to a tariff of over 100 percent' (IA, p. 50). In this regard, the IA uses the main findings of the empirical literature (Holste and Bergström, IMF and ECB studies). However, the limited quantification complicates the effort to assess the scale and scope of the problem and its consequences. The annexes to the IA provide more sector-specific details and examples, including sector-specific problems and drivers that stem from the above-described problems. However, the level of detail provided varies between annexes. The trading, post-trade and asset management sectors are described in Annex 7 (IA, p. 171-177), Annex 8 (IA, pp. 217-240) and Annex 9 (pp. 291-300). Finally, the objectives relating to innovation and supervision are described in Annex 10 (pp. 329-340) and annex 11 (pp. 359-379).

Subsidiarity / proportionality

In line with existing legislation, the legal basis for the proposed amendments remains the same as the one for the original legislative act, Article 114 of the Treaty on the Functioning of the European Union (TFEU) for the Central Securities Depositories Regulation, the Markets in Financial Instruments Regulation, the European Market Infrastructure Regulation, the Markets in Crypto-Assets Regulation, the Money Market Funds Regulation, and the founding regulations of the European Securities and Markets Authority, the European Banking Authority and the European Insurance and Occupational Pensions Authority. The legal basis for the Markets in Financial Instruments Directive, the UCITS Directive, the Alternative Investment Fund Managers Directive, the Financial Collateral Directive and the Settlement Finality Directive is Article 53(1) TFEU.

The IA briefly explains the need for EU intervention regarding these amendments, arguing that national solutions are not sufficient due to the scale and cross-border effects of the proposed actions. Specifically, because Member States have divergent legal frameworks, supervisory traditions and market structures, reforms undertaken individually by a Member State would not result in the necessary convergence of regulatory and supervisory standards and market practices (IA, p. 52). EU-level action is expected to remove regulatory barriers, ensure a level playing field and increase market efficiency and competitiveness. The added value of this initiative would arguably be to reduce legal and operational uncertainties for businesses and investors, ensure consistent supervision and preserve the integrity of the single market (IA, p. 53).

According to the IA, the initiative is proportionate because it ensures a balance between EU and national competences in terms of entities and activities (IA, p. 53). Stakeholders consulted also highlighted a need for a more proportionate, simplified and harmonised regulatory framework that reduces burdens particularly in trade, post-trade, asset management and investment funds (IA, p. 115). Nonetheless, stakeholders also agreed that proportionality 'must not undermine investor protection, market stability, or financial integrity' (IA, p. 115). Proportionality was also considered in the assessment of the options (IA, pp. 55-67).

National parliaments had until 16 March 2026 to provide feedback on whether the proposals on capital market integration and supervision complied with the subsidiarity principle. At the time this briefing was written, no reasoned opinion or request for exchange of information had been received. National parliaments were also consulted on the subsidiarity aspects of the proposal concerning settlement finality and financial collateral arrangements, with a deadline for feedback of 6 April 2026. No responses had been received at the time this briefing was written.

The European Economic and Social Committee adopted an opinion on 16 July 2025 (before the publication of the IA).

Objectives of the initiative

The IA explains that the general objective is to 'integrate and thereby improve the functioning of EU capital markets for the benefit of investors, businesses and the wider EU economy' (IA, p. 53). This is in line with the savings and investments union's strategy, which aims to foster citizens' wealth and economic competitiveness in the EU. This general objective is broken down into three specific objectives (SO):

These SOs are directly derived from the general objective identified above. Better Regulation Guidelines Tool# 15 specifies that the IA should include operational objectives to define the deliverables in more detail. The IA does not include operational objectives despite providing 38 indicators (IA, p. 98-100, see the Section on 'Monitoring and evaluation' below) to monitor the progress of achieving the above-defined objectives.

Therefore, the S.M.A.R.T. criteria laid out in the Better Regulation Guidelines, according to which objectives should be specific, measurable, achievable, relevant and time-bound do not seem to be fully applied in this IA, as the general objective is quite broad and no quantitative targets are set for the specific objectives and indicators (IA, p. 99). As with the other sections, the annexes (7-11) provide more sector-specific details for the above-described specific objectives, as well as sector-specific SOs.¹⁵ In addition, there is no indication on the timeline.

Without giving further details, Annex 3 states that the initiative expects to contribute to two United Nations Sustainable Development Goals (UN SDGs): SDG 8 (decent work and economic growth) and SDG 9 (resilient infrastructure, inclusive and sustainable industrialization, foster innovation) (IA, p. 152).

Range of options considered

The IA defines two packages of policy options – options 2 and 3 – based on a call for evidence, a targeted consultation, a literature review, and previous studies and initiatives (IA, pp. 54-67). In addition, the IA states that the Commission, ESMA and the ECB have worked in close cooperation to ensure that the preferred options would be feasible and to identify required resources for their implementation (IA, p. 56). Option 1 is the baseline option of no policy action, under which EU capital markets would remain fragmented (IA, p. 55) and the problems and adverse outcomes described in the above section would therefore persist .

Option 2 involves updating the rules for trading, post-trading and asset management to make them more uniform and easier to follow. This includes relaxing some rules for companies operating across borders under a single license. It would also improve connections between central securities depositories. Additionally, the rules for post-trading would be adjusted to better support new technologies, and the pilot program for distributed ledger technology would be expanded. Investment funds would get immediate access to the entire EU market once authorised in one Member State, saving time and money. Asset management firms would also be able to share resources across the EU without strict delegation rules.

Regarding supervision, option 2 aims to strengthen ESMA, as it would directly supervise major financial infrastructures (such as trading platforms, CSDs and CASPs). ESMA would also coordinate the oversight of large asset managers and investment funds.

Option 3 builds on option 2 but goes further by requiring mandatory connections between major trading platforms and CSDs. It would also introduce group-level authorisation for asset managers, full flexibility in the DLT pilot programme and full ESMA supervision over all infrastructures, asset managers and CASPs.

The tables below provide an overview of the options and measures assessed in the IA.

The IA compares the two options based on three goals: (1) increasing cross-border activity to create a more integrated market; (2) improving supervision by reducing fragmentation; and (3) encouraging innovation by removing regulatory barriers. The IA concludes that the additional measures under option 3 would not justify the extra costs and could pose unintended risks to competition and financial stability (IA, pp. 56-67).

The IA includes an overview of discarded policy options and the reasons for their rejection (IA, p. 68). However, it is unclear whether this overview encompasses the policy options discussed in the annexes. Below are the three discarded policy options:

The IA provides additional details on the policy options in its annexes; the trading, post-trade and asset management sectors are described in Annex 7 (IA, p. 177), Annex 8 (IA, pp. 240-242) and Annex 9 (pp. 300-301). Moreover, the IA provides more granular information for various sectors. However, the relationship between the information in the annexes and the policy options set out in the main text is not clearly explained. The IA presents two policy options, but given that option 3 builds on option 2, this raises doubts as to whether the policy options meet the BRG Tool #16 requirement of offering a wide range of options.

Option 2 and option 3 are compared in terms of efficiency, effectiveness and coherence (IA, p. 85). Option 2 is the preferred policy option for facilitating cross-border operations and innovation. Aside from being assessed as the most effective, efficient and coherent, the benefits associated with option 2 outweigh the costs. Moreover, the costs are feasible and more predictable than the costs associated with option 3 (IA, pp. 83-85). Option 2 is also the preferred policy option when it comes to increasing supervisory alignment, because it is feasible and proportional and respects subsidiarity. However, the IA envisions option 2 as a potential first step for deeper integration in the future (IA, pp, 94-95).

Assessment of impacts

In accordance with BRG Tool #18, an IA needs to consider 'impacts across the economic, environmental, and social pillars'. However, the IA considers that 'the package of the main policy options is not expected to have any direct significant social, environmental or fundamental right impacts' (IA, p. 69). For this reason, the IA focuses solely on the assessment of economic impacts. The IA provides a qualitative comparative table of impacts on stakeholders by policy option (IA, p. 86) and includes a summary table of the expected benefits and costs of the preferred initiative for the affected stakeholders (IA, pp. 145-150). The IA argues that no significant costs are expected for citizens (IA, p. 145, 151), and for this reason the overview of costs and benefits focuses on other stakeholders, businesses and administrations. Costs are categorised as direct and indirect and, based on their recurrence, as one-off or recurrent. In terms of benefits, the IA provides clear details on direct and indirect benefits, but its assessment is mostly qualitative. The IA states that the main reason for this is the 'inability of stakeholders to provide cost figures or estimation of benefits' (IA, p. 68) and that, consequently, many of the figures it refers to are estimates collected from a selection of stakeholders (IA, p. 68 and Annex 4).

The IA could have provided more detail on the underlying assumptions and been more transparent about the methodology used to calculate the macroeconomic impacts that led to the conclusion that EU GDP could cumulatively increase between €1.36 trillion and 3.62 trillion over 30 years (IA, p. 146). Nevertheless, the IA discusses the costs and benefits per sector.

For the trading sector, the IA could not quantify the level of one-off adaptation costs, but it expects that entities are likely to obtain a net benefit over the mid to longer term (IA, p. 74). For example, trading venues are expected to save between €47-120 million per year on cross-border activities.¹⁸

In post-trading, the IA concludes that harmonising standards, streamlining processes and decreasing compliance costs could decrease transaction costs by about 30% (IA, p. 76).

Similarly, the asset management sector would also benefit from the reduction of regulatory burdens. The IA does not provide quantification but affirms that the benefits would outweigh the costs related to changing the marketing process (IA, p. 77).

Regarding DLTPR, the IA states that the costs related to enhanced supervision at both the EU and the national level are minor and manageable, yet it does not provide quantification nor details about the risks associated with allowing a network of providers to issue accounts and transfer services in DLT. In fact, the IA considers that these risks 'could be somewhat offset by the heightened resilience of a distributed post-trading ecosystem' (IA, p. 78).

Regarding supervision, the IA provides a detailed overview of the costs that ESMA would face following the expansion of its supervisory tasks across the various sectors. These costs are as follows: €17-19.5 million for trading; €5.5-9.5 million for CCPs in post-trading; €5.5-7.5 million for CSDs; and €12-30 million for CASPs. In asset management, the coordination of supervision would cost €2-4 million and the oversight of cross-border fund distribution €2-3 million (IA, pp. 90-91).

The annexes (pp. 314-326) outline the impacts of all policy options for each sector and detail their pros and cons. However, these impacts are not always evidence-based, estimated or quantified. The report presents information in a fragmented manner; some relevant information is in the main text, and other important details are in the annexes, thus making it difficult to get an overview of the proposed policies and their impacts.

The territorial effects noted in the problem definition is not revisited in the assessment of impacts, nor are the effects on digitalisation.

Monitoring and evaluation

As required by BRG Tool #43, the IA includes an overview of how this initiative would be monitored and evaluated. The IA suggests carrying out a review of this initiative five years after its entry into force, in alignment with the Commission's BRGs (IA, p. 98). Given the absence of operational objectives (see Section on 'Objectives of the initiative'), the IA presents a list of 38 indicators to monitor the achievement of the identified specific objectives (IA, pp. 99-100). These indicators appear to be relevant, accepted, credible, easy to monitor and robust (RACER) (IA, pp. 99-100). In addition to sector-specific indicators, the IA suggests including indicators to measure wider market impacts but does not list them or set quantitative targets for them (IA, p.99).

The IA presents a non-exhaustive list of data sources to be used for evaluation purposes, namely: websites of NCAs, ESMA databases on financial instruments (MiFID/MiFIR¹⁹), clearing (EMIR) and notifications (AIFMD/UCITS) and third-party databases. It also mentions industry associations' regular market reports, indicators for capital market development used by the Commission's Directorate-General for Financial Stability, Financial Services and Capital Markets Union (FISMA) and stakeholder engagement (IA, pp. 98-99). Finally, the IA also specifies that ESMA and the European System of Central Banks (ESCB) carry a joint responsibility for collecting data for post-trading indicators, and ESMA is responsible for collecting data on supervision indicators (IA, pp. 280, 406).

Stakeholder consultation

In accordance with Chapter 7 of the BRG, Annex 2 to the IA presents a detailed account of the consultation activities that were undertaken (IA, pp. 108-143). The Commission launched a call for evidence (8 May 2025 to 5 June 2025) and a parallel targeted stakeholder consultation (15 April 2025 to 10 June 2025). Moreover, workshops and multiple meetings with relevant sectoral stakeholders were organised between May 2025 and July 2025. This was followed by additional targeted outreach in September and October 2025 to gather more data on the impacts of regulatory and supervisory barriers (IA, p. 108).

The IA includes a detailed synopsis of the results from both the call for evidence and the targeted consultation. The call for evidence had 53 respondents, of whom 62.3 % were business associations, 20.8 % companies and businesses, 9.4 % individual EU citizens, 1.9 % NGOs and 5.7 % fell within a residual 'other' category (IA, p. 108). This call aimed to identify barriers in trading and post trading, examine the fitness of the current regulatory and supervisory frameworks and test potential improvements to ESMA's toolbox. Overall, respondents agreed on the need for more integration and supervisory convergence, provided that changes are balanced, transparent and inclusive. Business associations and companies tended to prefer incremental progress within the current institutional framework, while NGOs and some citizens favoured stronger EU-level oversight to ensure coherence and accountability (IA, pp. 108-109).

The targeted questionnaire consisted of two parts and had 297 respondents in total. Both parts focused on existing barriers. Part 1 concentrated on simplification and burden reduction for trading, post-trading and asset management, liquidity deepening and cross-border operations in trading and post-trading. Part 2 addressed supervision, cross-border asset management services and investment funds, as well as horizontal obstacles in trading and post-trading (IA, p. 109). However, the number of respondents varied between part 1 (228 respondents) and part 2 (219 respondents), as well as across individual questions (IA, pp. 109-114).

Throughout the document, the IA presents the diverging views held across the different stakeholder groups, frequently referencing the feedback from the stakeholder consultations (IA, pp. 109-143). However, because both the call for evidence and the targeted consultation focused on existing barriers to trading, post-trading, asset management and supervision, with special attention given to cross-border operations, the findings mainly inform the problem definition. Consequently, they offer limited insight into stakeholder views on the policy options presented in the IA.

Supporting data and analytical methods used

Besides the stakeholder consultations and targeted interviews, the IA draws on two external studies titled 'Study of barriers to and drivers of, the scaling-up of funds investing in innovative and growth companies' and 'Study on consolidation and reducing fragmentation in trading and post-trading infrastructures in Europe' (IA, p. 154). Moreover, the IA is also based on a literature review and a mapping of existing data (IA, pp. 154-155).

Annex 1 provides an overview of all sources cited in the IA (IA, pp. 105-107). These sources are relevant and are quoted clearly throughout the IA. In addition, the IA provides extensive details and reflections on the data and analytics behind the expected growth of the EU economy, which are based on external papers (IA, p. 155-157).

The IA openly acknowledges the limitations underlying the data and analytical methods. According to the IA, 'extensive data collection required for more advanced modelling of impacts were not within the scope' (IA, p. 155). In addition, the IA admits that the evidence provided in relation to costs and cost savings was limited, and its representativeness of actual costs is unclear. Finally, the IA recognises significant data gaps concerning the costs and pricing of the services provided, attributing this partly to the reluctance of stakeholders to reveal cost structures or estimates (IA, p. 153).

Follow-up to Commission Regulatory Scrutiny Board opinion

On 8 October 2025, the Regulatory Scrutiny Board issued a negative opinion on the draft IA. The RSB highlighted significant shortcomings in key parts of the draft IA, including an unclear description of the problem's magnitude, a lack of clearly defined objectives for reducing regulatory and market barriers, and a lack of clarity regarding how these objectives related to the policy options. Furthermore, the RSB considered that impacts were not sufficiently assessed, noting a lack of quantification of costs and benefits across options and stakeholders, as well as a lack of quantification and evaluation of the methodologies used.

Following this first negative opinion, the IA report was resubmitted to the RSB and received a positive opinion with reservations on 14 November 2025. However, the RSB suggested that FISMA (the lead DG) take the following steps:

In line with the requirements of the BRG, Annex 1 of the IA explains (pp. 101-107) how the points raised by the RSB in the two opinions have been addressed. The Commission claims to have corrected the shortcomings identified except for the inclusion of additional modelling, the extrapolation of effects and the provision of more detailed breakdowns on costs and savings, which was not followed 'due to lack of data and time' (IA, p. 101). Since the previous draft IA is not publicly available, the extent to which the corrections have been incorporated into it could not be verified. Nevertheless, it seems that some shortcomings identified by the RSB remained unresolved.

Coherence between the Commission's legislative proposal and IA

The three proposals – for a regulation and a directive on supervision and capital market integration and for a regulation on settlement finality and on financial collateral arrangements²⁰ – appear to be in line with the IA's preferred option. In addition, the proposals highlight that they are in line with the Charter of Fundamental Rights of the EU.²¹