Regulatory Influencer: European Commission's Market Integration Package - Is This The Answer to European Competitiveness?

On December 4, 2025, the European Commission published its market integration package. This package is central to the commission’s Savings and Investments Union, a strategy to enhance the EU’s financial system’s capabilities. It represents one of the most far-reaching attempts in recent years to streamline the EU’s financial regulatory landscape and enhance the Union’s competitiveness.

It also complements a wider set of strategic initiatives aimed at addressing the EU’s structural economic weaknesses, including:

The package comprises three draft acts: 

• A master regulation to amend:
  • Regulation (EU) No. 1095/2010 (European Securities and Markets Authority Regulation – ESMAR).
  • Regulation (EU) No. 648/2012 (European Market Infrastructure Regulation – EMIR).
  • Regulation (EU) No. 600/2014 (Markets in Financial Instruments Regulation – MiFIR).
  • Regulation (EU) No. 909/2014 (Central Securities Depositories Regulation – CSDR).
  • Regulation (EU) 2015/2365 (Securities Financing Transactions Regulation – SFTR).
  • Regulation 2019/1156/EU (Cross-Border Distribution of Funds Regulation – CBDFR).
  • Regulation (EU) 2021/23 (Recovery and Resolution of Central Counterparties Regulation – RRCCPR).
  • Regulation (EU) 2022/858 (Distributed Ledger Technology Pilot Regulation – DLTPR).
  • Regulation (EU) 2023/1114 (Markets in Crypto-Assets – MiCA).
  • Regulation (EC) 1060/2009 (Credit Ratings Agencies Regulation – CRAR).
  • Regulation (EU) 2016/1011 (Benchmarks Regulation – BMR).
  • Regulation (EU) 2017/2402 (Securitisation Regulation – SR).
  • Regulation (EU) 2023/2631 (European Green Bonds Regulation – EGBR)
  • Regulation (EU) 2024/3005 (Environmental, Social and Governance (ESG) Rating Activities Regulation – ESGRAR).
• A master directive to amend:
  • Directive 2009/65/EC (Undertakings in Collective Investments in Transferable Securities – UCITS).
  • Directive 2011/61/EU (Alternative Investment Fund Managers Directive – AIFMD).
  • Directive 2014/65/EU (Markets in Financial Instruments Directive II – MiFID II).
• A settlement finality regulation. The regulation would repeal Directive 98/26/EC (Settlement Finality Directive – SFD) and amend Directive 2002/47/EC (Financial Collateral Arrangements Directive – FCAD).

This regulatory influencer will examine whether the package, as it stands, can achieve its stated objectives of improving the integration, efficiency and competitiveness of the EU financial system. 

The bigger picture

This package was proposed amid growing calls for the EU to reduce regulatory complexity and strengthen its competitiveness. According to the European Commission, the EU economy has been underperforming in recent years due to structural weaknesses that hinder its performance relative to international competitors and limit its strategic autonomy. In 2024, the market capitalisation of EU stock exchanges amounted to just 73 percent of GDP, compared with 270 percent in the United States.

Such concerns were clearly underscored in the Draghi and Letta reports, both of which called for urgent action.

The commission likewise highlighted existing barriers stemming from divergent regulatory approaches, often as a result of member states’ use of discretions when transposing and interpreting EU directives. These divergences have real-world consequences, adding complexity to cross-border operations. Regulatory complexity also affects financial market participants: the current framework is not only extensive and cumbersome, but it continues to expand. Over each of the past five legislative terms (each lasting five years), at least 370 new laws have been adopted, with the volume of legislation increasing by between 14 percent and 16 percent from one term to the next.

Consequently, and as explained by the commission, the package “focuses on removing the barriers that stem from the rules and supervisory approaches across the capital market ecosystem”. 

Master Regulation

The proposed master regulation introduces a wide range of amendments across several EU regulations. Its key objectives are to:

• Strengthen ESMA’s mandate, governance and funding, ensuring more consistent, transparent and accountable supervision across the EU.
• Grant ESMA direct supervisory authority over significant central counterparties (CCPs) and central securities depositaries (CSDs).
• Create a Pan-European Market Operators (PEMOs) regime, enabling operators to manage multiple trading venues across member states under a single licence.
• Transfer supervision of significant trading venues and PEMOs to ESMA.
• Improve the passporting regime for undertakings for collective investments in transferable securities (UCITS) and alternative investment funds (AIFs).
• Introduce a new Title Ia in MiFIR to further harmonise trading venue rules and remove national provisions that impede the functioning of the single market.
• Amend the consolidated tape framework to ensure it includes information on the trading venue offering the best bid and offer, as well as the depth of the order book.
• Modify the CBDR to reduce barriers to cross-border operations of investment funds.
• Revise the DLTPR to enhance flexibility, proportionality and scope, while removing time limits on permissions under the pilot regime.
• Centralise CASP authorisation, monitoring and supervision in ESMA, transferring these functions from national competent authorities.

Master Directive

The proposed master directive would amend:

• UCITS and AIFMD, with the aim of removing barriers to cross-border operations of fund managers and their EU groups, eliminating national discretions that may lead to divergent requirements and supervisory outcomes, introducing an EU-wide depositary passport and strengthening ESMA’s powers to promote a common supervisory culture and improve coordination among national authorities.
• MiFID II, by transferring provisions concerning the operation of trading venues to MiFIR.

Settlement Finality Regulation

The proposal repeals the Settlement Finality Directive (SFD) and replaces it with a directly applicable regulation to ensure greater consistency and legal certainty across the EU.

Why should you care? 

The European Commission’s proposal represents an ambitious and far-reaching effort to enhance the competitiveness of the Union. At this early stage, industry bodies have expressed cautious optimism.

For example, the European Fund and Asset Management Association (EFAMA) welcomed the package’s measures to remove cross-border barriers, enhance supervisory convergence and promote digital innovation. Similarly, the Managed Funds Association (MFA) described the proposal as an important first step towards lowering reporting costs and reducing duplicative data requirements.

The package is also expected to significantly advance market integration. National discretions and gold-plating have long impeded the ability of firms to provide cross-border services, due to the need to comply with additional local requirements. By ensuring that rules are uniformly applicable across the Union, expanding passporting opportunities for regulated markets and other entities and streamlining the cross-border distribution of investment funds, the proposal would reduce jurisdiction-specific burdens and ultimately benefit firms operating across multiple member states.

The extension of ESMA’s supervisory remit should similarly help with market integration. Although only certain institutions, namely CCPs, CSDs, large asset managers and CASPs will face direct supervision, given the central importance of the former two institutions in capital markets, such a step should only further serve to level the playing field across the Union. As explained by Mario Draghi in a speech in 2018, central supervision harmonises supervisory practices, provides a system-wide perspective for the monitoring and mitigation of risk and ultimately reduces fragmentation in the supervisory framework. 

An interesting addition to the scope of direct supervision is CASPs. Considering that many member states are still in the process of fully implementing MiCA, the commission’s move to adjust the supervisory framework is unexpected. Nevertheless, as crypto-assets continue to gain cross-border prominence, this change should promote more consistent application of the regulation across the Union.

Taken altogether, the package represents a significant step forward. The fact that most of the draft takes the form of directly applicable regulations adds further simplicity, reducing the scope for national discretions and gold-plating that often arise under directives.

However, certain elements of the package warrant caution. For instance, EFAMA has expressed being “deeply concerned” about the proposed annual reviews of large asset managers by ESMA, noting that they “will allow ESMA to second-guess the decisions of national supervisors”, potentially creating legal uncertainty. Other industry bodies, such as the Association for Financial Markets in Europe (AFME), have raised similar concerns.

As reflected in the 14 regulations amended by the proposed master regulation, the EU financial sector is likely to continue facing competitiveness challenges due to the prevailing regulatory burden. Although the package would remove certain obstacles to market integration, the overall scale and complexity of European requirements remain largely unchanged. Put differently, the Lamfalussy process, the Union's multi-level framework for creating more effective financial services legislation, remains intact, a framework that, according to AFME, “needs a reset”.

If the proposal represents merely another step towards simplification, it could serve as a valuable stepping stone. However, if this is intended as the commission’s last major announcement for the foreseeable future, it will fall significantly short of achieving meaningful reform.

Nonetheless, the package is not final and will need to be negotiated and approved by the European Parliament and Council before it enters into force. The acts are envisaged to apply: 

• For the master regulation, from 12 months to five years after its entry into force.
• For the master directive, 18 months after its entry into force.
• For the settlement finality regulation, five years after its entry into force. 

If adopted in its current form, the package will require firms to navigate innumerable changes to the EU regulatory landscape. Although transitional periods are provided, the reforms, ranging from enhanced cross-border service provisions and direct supervision by ESMA, to new licensing regimes and the hopeful removal of gold-plating, demand early and careful preparation. Firms should begin assessing their operations and compliance frameworks as soon as possible to ensure readiness for the forthcoming regulatory shifts that are expected to come. Regardless of the package’s final outcome, the trajectory is clear: reform is imminent.

Vixio will continue to monitor the development of the package closely and provide updates as it evolves.