EU Market Integration and Supervision Package: Capital Markets Reform Explained

On 4 December 2025, the European Commission published one of the most ambitious capital markets reform packages in a generation: the Market Integration and Supervision Package. Part of the Commission's Savings and Investments Union (SIU) strategy, it proposes to dismantle long-standing barriers to cross-border capital flows, centralise supervisory authority at EU level, and extend ESMA's direct oversight to crypto-asset service providers and other emerging market participants.

The package does not yet have the force of law — it is a legislative proposal subject to trilogue negotiations with the European Parliament and Council throughout 2026. But understanding what it proposes, who it affects, and when it would take effect is essential for any financial market participant with cross-border operations in the EU.

This guide covers the package's three legislative components, the supervisory reform at its heart, the implications for funds, trading venues, CASPs, and post-trading infrastructure, and the timeline to implementation.

Background: The Savings and Investments Union

The Market Integration Package is the operational core of the European Commission's Savings and Investments Union agenda — the successor to the earlier Capital Markets Union programme. The SIU, launched in 2025, aims to redirect EU household savings (approximately EUR 35 trillion, much of which sits in low-yield bank deposits) into productive investments that fund EU businesses and the green and digital transitions.

The diagnosis driving the package is structural: despite decades of single market integration, EU capital markets remain fragmented along national lines. Supervisory rules diverge between member states, cross-border investment faces inconsistent regulatory treatment, and ESMA's direct supervisory role is limited compared to equivalents in the United States, where federal supervision provides market-wide consistency.

The Market Integration Package is the legislative vehicle to change this. It is described by the Commission as the most significant reform to EU capital markets architecture since MiFID II.

The Three Legislative Components

The package consists of three interconnected legislative proposals:

1. The Market Integration Master Regulation

The Master Regulation is the centrepiece of the package. It amends 13 existing EU financial regulations in a single instrument — an unusual legislative approach designed to accelerate the reform:

• MiFIR — equity and non-equity transparency, the consolidated tape, trading obligation, and systematic internaliser rules
• EMIR — clearing obligations, clearing thresholds, and margin requirements
• CSDR — settlement discipline, cross-border CSD access, and the settlement finality framework
• SFTR (Securities Financing Transactions Regulation) — reporting and transparency
• MiCAR — amendments to crypto-asset service provider rules and supervisory architecture
• Credit Rating Agencies Regulation (CRAR) — supervisory updates
• Benchmarks Regulation (BMR) — governance and supervision
• Securitisation Regulation — reporting and transparency
• DLT Pilot Regime — aggregate cap raised to EUR 100 billion; asset-specific caps removed; simplified sub-regime for smaller DLT infrastructures (up to EUR 10 billion)
• EuGB Regulation (European Green Bond) — supervisory alignment
• ESG Ratings Regulation — scope and supervisory provisions
• ESMA Regulation — expanded mandate and direct supervisory powers
• Cross-Border Distribution of Funds Regulation (CBDR) — streamlining of marketing notifications

The Master Regulation also creates a new entity type — the Pan-European Market Operator (PEMO) — a single ESMA-licensed entity permitted to operate trading venues across multiple member states through one legal entity, eliminating the need for separate national venue licences.

2. The Market Integration Master Directive

The Master Directive amends the directive-level legislation in the package, including:

• MiFID II: Changes to investor protection requirements, cross-border service provision, and the treatment of complex financial instruments
• AIFMD: Amendments affecting alternative investment fund managers operating cross-border
• UCITS Directive: Streamlining of cross-border fund distribution rules

The Directive requires transposition into national law by member states, meaning that even once adopted, there will be a transposition period adding time before national rules fully reflect the new requirements.

3. The Settlement Finality Regulation

The Settlement Finality Regulation modernises the legal framework for financial market infrastructures by addressing settlement finality in cross-border transactions — particularly relevant for distributed ledger technology (DLT)-based infrastructure and the expanding use of tokenised securities under the DLT Pilot Regime.

Supervisory Centralisation: The ESMA Power Shift

The most structurally significant element of the package is the proposed transfer of direct supervisory authority to ESMA for a range of entities. Currently, most financial market participants are supervised by their national competent authority (NCA), with ESMA playing a coordination and convergence role. The package proposes to change this for specific categories:

Direct ESMA Supervision of CASPs

Under the package, ESMA would assume direct supervisory responsibility for all crypto-asset service providers (CASPs) — moving all CASP supervision from national competent authorities to the EU level. Currently, MiCAR places CASP supervision entirely with NCAs (AFM, BaFin, CSSF, CySEC, etc.). The Market Integration Package would transfer this supervisory role comprehensively to ESMA.

This is among the most significant changes in the package for the crypto industry. Every MiCAR-authorised CASP — regardless of size or number of member states served — would face ESMA as its primary supervisor rather than its home-state NCA. For larger CASP groups currently managing relationships with multiple NCAs, this would simplify the supervisory landscape; for smaller CASPs currently supervised by a single NCA, it means adapting to ESMA's supervisory approach and reporting requirements.

Direct ESMA Supervision of Trading Venues and Post-Trading Infrastructure

The package extends ESMA's direct supervisory mandate to:

• Trading venues that account for more than 50% of Union trading volume in any instrument class — those entities would shift from NCA to ESMA oversight
• Significant central counterparties (CCPs) — determined by open interest, OTC derivatives cleared, and margin requirements; large EU CCPs (currently supervised by national authorities) would move to ESMA direct supervision
• Central securities depositories (CSDs) — those accounting for more than 5% of EU settlement instruction value or operating cross-border above defined thresholds would be subject to ESMA direct supervision

For trading venues and clearing infrastructure operators that operate across multiple member states, a centralised ESMA supervisor would replace the current model of primary NCA oversight. The new Pan-European Market Operator (PEMO) category allows a trading venue group to operate across member states under a single ESMA licence through one legal entity — eliminating the current requirement for separate national venue licences in each jurisdiction.

What Remains at National Level

The package does not propose full supervisory centralisation. NCAs would continue to supervise:

• Banks and credit institutions (which remain under national supervision complemented by the European Central Bank's Single Supervisory Mechanism for significant institutions)
• Non-significant CASPs
• Smaller investment firms without significant cross-border activity
• Insurance undertakings (ECB/EIOPA framework unchanged)

Key Substantive Reforms

Beyond the supervisory architecture, the package contains substantive rule changes affecting daily compliance operations:

MAR Delayed Disclosure Reform (Note: Listing Act, not MIP)

A related but separate reform affects the Market Abuse Regulation's delayed disclosure regime. This reform comes from the EU Listing Act (Regulation 2024/2809) rather than the Market Integration Package itself, but its timing is closely linked to the MIP agenda.

The key change: intermediate steps in protracted processes — such as M&A transactions, restructurings, and debt negotiations — will no longer independently constitute inside information subject to immediate disclosure. Instead, disclosure obligations will crystallise at the conclusion of the process. Issuers will therefore make far less use of the Article 17(4) MAR delay mechanism for protracted processes.

This enters application on 5 June 2026. ESMA launched a consultation on revised MAR delayed disclosure guidelines on 19 February 2026, with responses due 29 April 2026. A separate detailed analysis of this reform is available: MAR Delayed Disclosure Reform: What Issuers Need to Know Before 5 June 2026.

MiFIR Equity Transparency: Already In Force

While the full Market Integration Package remains in trilogue, one linked measure has already entered into force. Commission Delegated Regulation 2026/482, published 27 February 2026 and effective from 2 March 2026, amends MiFIR's equity transparency framework:

• Liquid market determination for equities now based on market capitalisation (replacing the former free-float criterion)
• Revised systematic internaliser (SI) size thresholds
• Updated definition and disclosure requirements for post-trade risk reduction (PTRR) services
• "Reasonable commercial basis" provisions for market data (applicable from 23 August 2026)

Investment firms and trading venues should review their current MiFIR reporting obligations against these changes, which are already in force.

Equity Transparency Reforms

MiFIR's equity transparency rules — requiring real-time pre- and post-trade transparency for shares and ETFs on EU trading venues — are being revised to:

• Address the fragmentation of equity trading liquidity across dark pools, systematic internalisers, and lit venues
• Strengthen the EU consolidated tape for equities (already under reform)
• Revise the double volume cap mechanism

Investment Research Changes

Following Brexit-related competitive dynamics (the UK moved away from MiFID II's research unbundling rules), the package is expected to include reforms to the research payment framework that ease cost-sharing arrangements between asset managers and brokers.

Implications for Fund Managers

Fund managers need to track several elements of the package:

AIFMD Amendments

The Master Directive proposes targeted amendments to AIFMD affecting:

• EU-wide depositary passport: The package introduces a harmonised depositary passport — AIFs and UCITS would no longer need to appoint a depositary domiciled in each fund's home member state. A depositary authorised in one member state could serve funds across the EU, removing a significant cross-border operational barrier
• Cross-border passporting streamlined: "Passporting upon authorisation" would allow AIFMs to begin marketing in host member states immediately upon notification, without waiting for NCA review periods
• ESMA review for large managers: ESMA would gain annual review powers over large cross-border asset management groups with AUM of EUR 300 billion or more — a new layer of EU-level oversight for systemically significant firms
• Delegation arrangements: Supervisory convergence on substance requirements for delegation to non-EU entities

AIFMs with complex delegation chains to non-EU investment managers should monitor how the package's AIFMD provisions interact with existing AIFMD II requirements applying from April 2026.

UCITS Reforms

The UCITS Directive amendments focus on:

• Harmonising fund documentation requirements across member states
• Eliminating residual gold-plating that creates divergent national implementations
• Aligning UCITS cross-border distribution with the amended AIFMD framework, including the depositary passport

SFDR Alignment

The package includes provisions intended to align SFDR with the outcomes of the SFDR 2.0 review. The specifics of any SFDR amendments within the package are subject to negotiation, but the Commission has signalled that data quality improvements — driven by CSRD — should enable more robust PAI disclosure requirements.

Implications for Crypto-Asset Service Providers

For CASPs authorised or seeking authorisation under MiCAR, the Market Integration Package proposes a fundamental change to the supervisory architecture: ESMA would assume direct supervisory responsibility for all CASPs, removing NCA supervision of crypto-asset service providers entirely.

Key implications:

MiCAR authorisation process: Unaffected. The transitional period ends 1 July 2026 and MiCAR authorisation requirements remain fully applicable. CASPs must obtain MiCAR authorisation from their home-state NCA on the existing timeline — do not defer applications pending this reform.

Post-adoption CASP supervision: Once the package is adopted and transitional provisions apply, ESMA would become the primary regulatory contact for all MiCAR-authorised CASPs. This involves:

• Single EU-level supervisor replacing the current patchwork of NCA oversight
• Harmonised supervisory practices and reporting obligations across all member states
• ESMA's systemic risk monitoring mandate applied to the entire CASP sector

For CASP groups currently operating across multiple member states and managing multiple NCA relationships, the move to a single ESMA supervisor would reduce administrative complexity. For CASPs operating under a single NCA today, it means adapting to ESMA's supervisory approach and reporting frameworks once the package applies — not before 2028 at the earliest.

Legislative Timeline

The Market Integration Package follows the standard EU legislative process:

Stage	Expected Timing
Commission proposal published	4 December 2025
Council working group analysis	Q1 2026 (ongoing)
Council general approach	Q3-Q4 2026 (estimated)
European Parliament position	Q3-Q4 2026 (estimated)
Trilogue negotiations	2026-2027 (estimated)
Final text adopted	2027 (estimated)
Transitional period	12–24 months after adoption
Application to market participants	2028-2029 (estimated)

The Council held its first exchange of views on the package in March 2026, confirming that negotiations are progressing but that significant political work remains. The package's scope and ambition mean trilogue will take time — particularly on the supervisory centralisation provisions, where member states have historically resisted transferring supervisory authority to ESMA.

What Market Participants Should Do Now

While the package will not apply for several years, there are practical steps to take now:

1. Monitor the legislative process — Track the Council working group positions on ESMA supervisory centralisation; these will determine the final scope of which entities face ESMA direct supervision
2. Assess significance criteria — As CASP or trading venue operators, assess whether your entity would likely qualify as "significant" under the criteria under discussion
3. Continue MiCAR compliance — The July 2026 CASP authorisation deadline is unaffected by the Market Integration Package; do not defer MiCAR applications pending this reform
4. Track MAR delayed disclosure reform — If you are a listed company or advise on inside information management, the delayed disclosure reform may materially change your compliance procedures once finalised
5. Engage in consultations — The Commission and Parliament may issue further consultations as the package develops; industry associations (EFAMA, ISDA, AFME) will be key channels for shaping outcomes

How financialregulations.eu Can Help

Our platform covers the regulatory frameworks that the Market Integration Package proposes to reform — including MiFIR, MiFID II, MAR, EMIR 3, MiCAR, SFDR, and AIFMD II. You can:

• Track reform progress: Query the current state of any regulation and cross-reference proposed amendments
• Analyse current obligations: Understand what the existing rules require while the reform progresses
• Impact assessment: Upload your firm's regulatory documentation to assess how proposed changes might affect your compliance framework

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Frequently Asked Questions

What is the EU Market Integration and Supervision Package?

The EU Market Integration and Supervision Package is a legislative proposal published by the European Commission on 4 December 2025. It consists of three components — the Market Integration Master Regulation, the Market Integration Master Directive, and the Settlement Finality Regulation. The package proposes to centralise EU-level supervisory powers in ESMA for significant cross-border entities (including large CASPs and trading venues), amend substantive rules across MiFIR, MAR, EMIR, SFDR, AIFMD, and UCITS, and support the Commission's Savings and Investments Union strategy.

Does the Market Integration Package affect MiCAR authorisation?

No. The Market Integration Package does not affect the MiCAR transitional period or the requirement for CASPs to obtain MiCAR authorisation before 1 July 2026. CASPs should continue their authorisation applications with their home-state NCA. The package's ESMA supervision provisions — which could eventually transfer oversight of significant CASPs to ESMA — would only apply after the package is adopted (not expected before 2027) and after a transitional period.

When would the Market Integration Package apply?

The package is at proposal stage as of March 2026. It must complete trilogue negotiations (Commission, Council, Parliament), be formally adopted, and then enter a transitional period before applying to market participants. Based on the legislative timeline, application is not expected before 2028-2029 at the earliest.

Which regulators will supervise CASPs under the package?

Under the package as proposed, CASPs would be divided into two tiers: non-significant CASPs (supervised by their home-state NCA, as under current MiCAR) and significant CASPs (subject to direct ESMA supervision). Significance criteria are still under negotiation but are expected to be based on cross-border reach, asset volumes, and transaction activity. The majority of CASPs would likely remain under NCA supervision.

How does the Market Integration Package relate to the Savings and Investments Union?

The Market Integration Package is the legislative implementation of the Savings and Investments Union (SIU) strategy, the Commission's overarching agenda to redirect EU household savings into productive investment. The SIU identified capital markets fragmentation and inconsistent supervision as key barriers to investment. The package addresses these through supervisory centralisation, rule harmonisation, and removal of cross-border barriers for funds, trading venues, and investment services.