Improved integration is essential to delivering the Savings and Investments Union and strengthening the EU’s global competitiveness. 

MFA submitted recommendations to the European Commission (EC) to better integrate EU capital markets in a letter. The proposed reforms would improve regulatory alignment both across member states and with other key jurisdictions, enhance capital formation, and support a more globally competitive EU financial system.

“Integrated and efficient capital markets are the foundation necessary to deliver a successful Savings and Investments Union,” said Jillien Flores, MFA Chief Advocacy Officer. “Greater integration will lower costs, enhance cross-border investment, and make the EU a more attractive destination for global capital. If adopted, these reforms would allow alternative investment funds to operate more efficiently across borders and deliver better outcomes for their investors, including pension funds and foundations.”

The letter outlines how duplicative reporting, inconsistent member state rules, and disproportionate regulatory burdens have prevented EU capital markets from fully integrating. These barriers hinder Alternative Investment Fund Managers’ (AIFMs) efforts to scale their operations across the EU, limiting their ability to provide capital, liquidity, and risk management to the EU market. Addressing these issues is essential to delivering on the Commission’s ambition for a true Savings and Investments Union.

MFA’s specific recommendations are to:

• Tailor regulations based on fund size to reduce barriers and support the growth of smaller AIFMs

• Align short sale and derivatives reporting rules more closely with the UK and U.S. to reduce fragmentation and compliance costs

• Harmonise AIFM rules across member states and allow greater reliance on home-country authorisations, including for U.S. and UK AIFMs

• Return Annex IV reporting to its original purpose of monitoring for systemic risk, and coordinate revisions with changes to Form PF in the U.S.

• Promote innovation in emerging technologies like tokenisation and distributed ledger technology to modernise EU markets

• Clarify how EU marketing rules apply to non-EU fund managers to improve cross-border capital flows

• Focus supervisory oversight on higher-risk activities

Read the full letter here.

Source: MFA

EFAMA publishes recommendations for capital market integration

Uniform implementation of EU capital market rules is needed to enable cross-border investment, not big regulatory overhauls

The European Commission is currently working to identify and remove barriers to further integration of EU capital markets, as part of their broader Savings and Investment Union plan. This is an important goal that would benefit EU citizens and the economy, and their focus on simplification and proportionality in their recent consultation on the topic is a move in the right direction.

In addressing the various issues outlined in the consultation, it is crucial to evaluate whether EU action is necessary (whether legislative or non-legislative) and at which level of the regulatory process. New European Commission proposals are not always the most suitable option for eliminating some of the remaining barriers. Therefore, the Commission should be cautious in proposing bold and immediate actions without conclusive evidence that this approach is the most effective way to achieve the desired outcomes.

Vincent Ingham, Director of Regulatory Policy at EFAMA, said: “Policymakers and supervisors need to prioritise the uniform implementation of EU rules across member states and remove frictions in the functioning of our capital markets, without adding another layer of legislative measures. Reopening of legal texts, with all the complexities, costs and delays typically involved, should only be considered as a last resort. This is particularly true for core sectoral regulations, such as UCITS and AIFMD, that have been under review very recently.”

EFAMA’s key recommendations for further capital market integration are listed below:

Asset management and funds: The UCITS regime is recognised globally for its security, diversification, liquidity, and transparency. To preserve its status as a regulatory export brand, legislative changes to core provisions should be avoided, and the focus should be on guidance and less invasive measures. However, there is potential for better codification, harmonisation, and supervisory dialogue when interpreting UCITS and AIFMD, especially in areas like regulatory approval timelines, supervisory fees, and reporting obligations, which vary across jurisdictions. Additionally, addressing inefficiencies in intra-group delegations could help asset management companies maximise the benefits of a group structure.

Supervisory framework: Granting ESMA direct supervision over asset managers with significant cross-border activities would not lead to more integrated markets. Additionally, supervisory colleges chaired by ESMA or national supervisors would further complicate asset management supervision. ESMA could achieve similar outcomes more effectively by utilising existing supervisory convergence tools and should serve as the supervisory data hub for capital markets, which would enhance data sharing among public authorities.

Best-execution: In Europe, best execution is based on a total consideration approach that evaluates price, costs, speed, and other factors to optimise outcomes for clients. We don’t believe the EU should adopt a US-style order protection rule and mandatory order routing (Regulation NMS). A mandated interconnectivity structure between trading venues would increase costs without guaranteeing better results for investors.

Consolidated Tape: Reviewing the coverage of the pre-trade Equities/ETF tape is a great step. A pre-trade equities/ETF tape that, from the outset, contains attributed European Best Bid and Offer (EBBO) and five layers of quotes would greatly enhance the commercial viability of the tape and address some of the fragmented liquidity issues in the ETF market.

Integration of market infrastructures: To address the fragmented EU post-trade market, promoting central counterparty (CCP) choice and central securities depository (CSD) interoperability is a realistic approach. While this may not achieve the efficiency of a single utility, it would enhance competition and reduce friction in cross-border transactions.

Distributed Ledger Technology (DLT): The Commission highlights the transformative role of DLT for post-trading market infrastructures, emphasising the need for regulatory reforms to support a tokenised ecosystem. We support revising the DLT Pilot regime, as the current thresholds for market capitalisation and issuance size are too low. Doubling these thresholds would attract more participants and enhance secondary market trading through increased DLT-based platforms.

Investor disclosures: The PRIIPs framework requires urgent simplification, however any changes must be carefully considered to avoid additional implementation costs and to present a coherent picture to retail investors. The simplest way to achieve this is through the deletion of unnecessarily complex provisions such as:

• Implicit transaction costs: The current methodology is complex and prohibitively expensive to calculate, while only representing a very small portion of the overall costs for investors.
• Future performance scenarios: It is not possible to predict the future accurately. Therefore, funds should only disclose past performance, in accordance with the UCITS framework.

Read the full SIU market integration policy paper here.

Source: EFAMA

ICI Statement on Targeted Consultation on Integration of EU Capital Markets

Investment Company Institute (ICI) Chief Global Affairs Officer Tracey Wingate released the following statement regarding ICI’s response to the European Commission’s (EC) targeted consultation on the integration of European Union (EU) capital markets.

“The Investment Company Institute (ICI) welcomes the European Commission’s efforts to deepen and integrate EU capital markets and strongly supports the goals and objectives of the Savings and Investment Union (SIU). In its response to the Commission’s targeted consultation, ICI highlights that achieving these ambitions will require meaningful progress in reducing the persistent barriers to cross-border fund distribution, supervisory fragmentation, and regulatory complexity that currently limit the efficiency and competitiveness of the EU market for investment funds.

“ICI’s response notes that while flagship EU frameworks such as UCITS Directive have provided the foundation for a thriving global regulated fund sector, however, the Single Market for investment funds remains incomplete. Asset managers continue to face inconsistent national implementation of EU rules, national gold-plating, and divergent supervisory practices across Member States. These obstacles drive up costs, delay product launches, fragment investor access, and ultimately diminish the benefits that EU savers and the wider economy should be receiving from a more integrated market.

“ICI calls on the Commission to prioritise supervisory convergence, particularly through enhanced coordination among national competent authorities (NCAs), with a supporting role by ESMA rather than pursuing centralised EU-level supervision. Our response also advocates for reforms to streamline and harmonise authorisation procedures, marketing rules, and regulatory reporting, so that asset managers can operate more efficiently across borders and provide European investors with broader, more competitive investment choices.

“Further, ICI urges the Commission to conduct cumulative impact assessments of financial regulations, to ensure that regulatory frameworks remain balanced and proportionate — protecting investors while also enabling innovation, operational scale, and sustainable market growth. Simplifying overlapping reporting regimes (SFDR, CSRD, PRIIPs, UCITS, AIFMD, and MiFID), improving the coherence of disclosure requirements (notably for PRIIPs), and addressing the operational burdens of fragmented marketing regimes are seen as critical steps.

“Finally, the response emphasises that the success of the SIU will depend on fostering a globally open and competitive European investment environment—one that encourages participation by national, European, and international asset managers. A more globally integrated EU market will drive more efficient capital allocation, support economic growth, and deliver better outcomes for European savers seeking to build financial security through well-regulated investment products.”

Read the full response here.

Source: ICI

AFME responds to Commission consultation on integration of EU Capital Markets

With the deadline for the Commission’s wide-ranging consultation on the integration of EU capital markets closing, Adam Farkas, Chief Executive of the Association for Financial Markets in Europe (AFME), said:

“AFME’s members share the EU’s ambition of building deeper and more liquid markets that are competitive on a global level. The EU has a moment of opportunity to attract global capital and must focus efforts on targeted, evidence-based policy proposals, that focus on growing demand from all investor types and upholding the principles of competition and user choice. However, we are deeply concerned that some of the proposals related to equity market structure contained in the consultation are not conducive to this end.  On the contrary, we believe that measures which would reduce the complexity and high frictional costs of the current post trade ecosystem should be prioritised, and call for ambitious and innovative thinking to unlock competition in this space. We look forward to exchanging views with the Commission on this further ahead of the expected legislative proposal later this year.”

In AFME’s response it:

Cautions against changes to market structure

• AFME emphasises that the EU is unlikely to achieve its shared ambition for growth by fundamentally changing the regulatory framework for equities trading through replicating the market structure features of other jurisdictions (with different geographies, legislative frameworks, issuer and investor bases, and political priorities).
• Any radical changes to microstructure (such as the idea of introducing an order protection rule) would be highly undesirable and risk portraying the EU as being in a state of constant regulatory flux. Especially at a moment when investors – including those newly attracted to Europe in light of recent geopolitical trends – wish to navigate markets characterised by regulatory stability, predictability and consistency. Such detrimental changes would also burden market participants with considerable implementation and compliance costs.

Emphasises the need to promote measures that will generate investor demand for EU securities

• AFME emphasises that building deeper and more liquid securities markets in the EU is a ‘demand’ issue and goes far beyond market infrastructure issues.
• Addressing this will require decisive action across Member States to build their supplementary pension systems through promoting an investment culture and financial education, as well as taking further steps towards harmonising tax and securities law frameworks.

Calls for a streamlined EU regulatory framework

• AFME emphasises its support for a streamlined EU regulatory framework, making markets easier to navigate without compromising on safety and investor protection. The Association calls for an in-depth assessment of how the Lamfalussy process is functioning in view of the EU putting in place a more agile and effective regulatory and supervisory approach for globally competitive banking and capital markets.

Calls for policymakers to prioritise access to markets for all investors

• Access to markets should be made more cost effective for all investors, and policy makers’ focus should therefore remain on addressing barriers to entry, such as the market failure in market data being available on a reasonable commercial basis, and inefficiencies in the post-trade ecosystem, which add unnecessary frictional costs to all market participants.

Supports improving competition for post-trade financial market infrastructure services

• Several influential recent reports (Draghi, Noyer, Letta) have identified that the post-trade financial market infrastructure in the EU is complex, fragmented and suffers from a lack of competition between providers. AFME supports this analysis and believes that improving competition for the provision of post-trade financial market infrastructure services should be the critical objective of the new legislative proposal.
• Achieving this requires a multi-faceted approach. An important first step is increased regulatory scrutiny on the pricing of post trade services – for which incumbents have a quasi-monopolistic position – ensuring that they are fair and transparent.
• More ambitiously, the creation of a common issuance layer, potentially leveraging T2S, could be considered, as well as further exploration of potential new, innovative post trade models based on Distributed Ledger Technology (DLT).

Source: AFME