EU MISP reforms: ESMA to supervise more firms

Why should I read this?

On 12 June 2026, the European Parliament’s Economic and Monetary Affairs Committee (ECON) published three draft reports. They propose amendments to the EU Market Integration and Supervision Package (MISP). The MISP is part of the EU’s Savings and Investments Union (SIU) strategy. The SIU aims to build a single EU-wide capital market. At the moment, EU financial markets are split along national lines. Rules differ between Member States. Supervision sits with national regulators. That makes it harder and more expensive for firms to serve clients in other countries.

The MISP tries to fix this. It moves more supervisory power to the EU’s financial markets regulator, the European Securities and Markets Authority (ESMA). ESMA is the EU body that oversees securities markets, investment firms and trading venues. The MISP also harmonises rules to make cross-border business easier. The three reports affect market infrastructure firms, crypto firms, asset managers and large fund groups. Other ECON members may table amendments by 16 July 2026. ECON plans to vote on its negotiating position on 1 December 2026.

What should I do about the MISP package?

The proposals are at an early stage. You still have time to shape them. You should consider these steps:

• Work out which of the three proposals affect your business.
• If you manage funds, check whether you could fall within a large asset management group supervised by ESMA.
• If you use efficient portfolio management techniques (such as securities lending), review your revenue sharing arrangements and your disclosures to investors.
• If you run market infrastructure (such as a clearing house, settlement system or trading venue), prepare for direct ESMA supervision.
• If you provide crypto services, assess whether you would be a significant crypto-asset service provider (CASP). A CASP is any firm authorised to provide services relating to crypto-assets, such as trading, custody or exchange.
• Consider responding through your trade body before the amendment deadline of 16 July 2026.

What else do I need to know about the MISP package?

The MISP package contains three legislative proposals. Each was assigned to a different ECON rapporteur (that is, the member of the European Parliament responsible for steering the proposal through committee). Each rapporteur has now published a draft report containing proposed amendments. 

The Omnibus Regulation

Rapporteur Markus Ferber (European People’s Party) wants:

• A secondary competitiveness objective for ESMA

At present, ESMA’s objectives focus on investor protection, market integrity and financial stability. Ferber wants to add a duty to consider the competitiveness and international attractiveness of EU capital markets. This mirrors the approach the UK has taken with the Financial Conduct Authority (FCA).

• An ESMA Executive Board of five independent members with double voting rights in the Board of Supervisors

The Board of Supervisors is ESMA’s main decision-making body. It includes one representative from each national regulator. Double voting rights mean each Executive Board member’s vote counts twice, giving the independent EU-level members more weight than any single national regulator.

• A single central notification platform for asset managers, replacing notices to each national regulator and a formal “report once” principle

At the moment, firms often report the same information to several regulators in different formats. The report once principle means a firm would submit data once to a central platform. Each regulator would then draw what it needs from that platform. This would cut duplicate reporting.

• More transparency for systematic internalisers (SIs)

An SI is a firm that deals on its own account by executing client orders outside a trading venue (such as a stock exchange). Ferber proposes requiring SIs to publish rulebooks setting out their access criteria, execution processes and fee structures. He also proposes a minimum price improvement of one tick size over the best public market price.

• Deletion of the Commission’s proposed list of core market data for the equity and exchange traded fund (ETF) consolidated tape

An ETF is a fund that tracks an index or basket of assets and trades on a stock exchange like a share. A consolidated tape is a single, live data feed that combines price and trade information from all trading venues. The idea is to give investors one view of the whole market, rather than having to check each venue separately. Ferber considers it premature to expand the tape’s scope because the equity consolidated tape is not yet in operation.

• Direct ESMA supervision of all EU central counterparties (CCPs) and central securities depositories (CSDs), not only the significant ones

A CCP stands between the buyer and seller of a financial instrument after a trade. It guarantees that the trade will complete, even if one side defaults. A CSD holds securities in electronic form and records changes of ownership when trades settle. The Commission originally proposed giving ESMA direct oversight only of CCPs and CSDs large enough to be classified as significant. Ferber wants ESMA to supervise all of them, to eliminate regulatory differences between Member States.

• A permanent, mainstream regime for distributed ledger technology (DLT) market infrastructure, with higher transaction caps

DLT is the technology behind blockchain. It allows multiple parties to hold and update a shared record without a central administrator. The EU currently runs a temporary pilot for DLT-based trading and settlement. Ferber proposes converting this into a permanent regime and raising the limits on the value of transactions it can process.

• Direct ESMA supervision only for significant crypto-asset service providers (CASPs), with smaller providers left to national regulators

The Commission originally proposed giving ESMA oversight of all CASPs. Ferber considers that disproportionate for small firms operating mainly in one country.

The Omnibus Directive

Rapporteur Eero Heinäluoma (Socialists & Democrats) welcomes the package but wants stronger investor protection:

• Direct ESMA supervision of large asset management groups

ESMA would identify these groups based on their net asset value (that is, the total value of the investments they manage) and the extent of their cross-border operations.

• Direct ESMA supervisory powers over depositaries

A depositary is an institution responsible for safekeeping a fund’s assets. It also monitors the fund manager to check it acts in investors’ interests. Currently these are regulated at Member State level. If the change is enacted, depositaries will have to build new relationships with the ESMA regulators, who will likely take a different approach to regulating and enforcement than the national competent authorities depositaries were used to dealing with.

• Safeguards for efficient portfolio management techniques (such as securities lending)

Securities lending is a practice in which a fund temporarily lends securities it holds to another party in return for a fee. Heinäluoma proposes requiring all revenues from these techniques to be returned to the fund, not kept by the manager or its agents.

• Non-EU alternative investment funds (AIFs) and managers (AIFMs) to be barred from marketing in the EU if they are based in jurisdictions the EU designates as non-cooperative for tax purposes or high-risk for anti-money laundering

The EU maintains a list of countries that do not meet international standards on tax transparency or are high-risk for anti-money laundering. Funds and managers based in those countries would no longer be able to market into the EU.

• Regular stress testing for open-ended alternative investment funds

An open-ended fund allows investors to buy and sell units on a regular basis. The fund must be able to meet those redemptions. Stress testing checks whether a fund can cope with a sudden wave of withdrawals.

• Variable pay linked to environmental, social and governance (ESG) targets, with a fixed-to-variable pay ratio

Currently variable pay is typically linked solely or principally to financial performance. Heinäluoma proposes linking variable pay to ESG targets to further reinforce the ESG obligations imposed on the funds industry, whether or not the fund is an ESG fund or its investors seek ESG outcomes.

The Settlement Finality Regulation

Rapporteur Giovanni Crosetto (European Conservatives and Reformists) welcomes turning the Settlement Finality Directive into a directly applicable regulation, thus avoiding the differences that arise when Member States implement a directive. He proposes:

• A single framework that applies directly in every Member State
• Technology neutrality, so the framework supports distributed ledger technology (DLT) and tokenisation

DLT allows multiple parties to record ownership and transfers on a shared digital ledger. Tokenisation is the process of representing a traditional asset (such as a bond or a share) as a digital token on that ledger. The rapporteur wants the settlement finality rules to work for these new systems in the same way as for traditional systems.

• A new definition of “final settlement”

Final settlement is the moment at which a transaction becomes complete, unconditional and irreversible. Once settlement is final, it cannot be unwound, even if one of the parties later becomes insolvent. The rapporteur proposes defining this in the text of the regulation itself, rather than leaving it to national law.

• Deletion of the joint and several liability rule for operators that run a payment or settlement system together (sometimes called a consortium arrangement)

There is no standard abbreviation for these operators. Under the current rule, each operator in the consortium is liable for the whole obligation. Crosetto proposes removing this.

• Two sets of regulatory technical standards (RTS) from ESMA and the European Banking Authority (EBA)

The EBA is the EU body that oversees banks and credit institutions. The RTS would set out the detailed rules on timing and procedures for settlement finality.

Our view

Under the reforms ESMA will gain power and national regulators will lose it. On market infrastructure, the committee wants to go further than the Commission. It would bring all EU CCPs and CSDs under ESMA. It also adds a competitiveness objective, modelled on the statutory objectives of the UK’s financial services regulators, the FCA and the Prudential Regulatory Authority (PRA).

These proposals carry real risks of unintended consequences for EU fund managers.

• The large group threshold could push groups to restructure below the trigger. That could fragment operations rather than integrate them. 
• The securities lending revenue-return rule may cause some managers to stop lending altogether. That would reduce liquidity and returns for investors.
• The non-cooperative jurisdiction bar could also disrupt existing fund structures. Some jurisdictions on the grey list are cooperating with the EU but have not yet been removed. Funds domiciled in those countries could lose EU market access before the jurisdiction completes its reforms.
• Linking variable pay to environmental, social and governance targets for managers of non-ESG funds raises proportionality concerns. Investors may have chosen those funds precisely because they are not ESG funds.

For UK firms, the package matters. It will reshape the rules governing access to EU markets. UK groups with EU subsidiaries managing more than EUR 100 billion in net assets could be subject to direct ESMA supervision. That would replace the national regulator they deal with today. Fund managers with EU operations should pay close attention to the large group threshold.

Moving supervisory power from Member States to ESMA is politically sensitive and the Czech and Italian parliaments have already raised subsidiarity concerns. Final rules are unlikely before 2027 at the earliest.

Trevor Dolan, Partner in Financial Services in Dublin comments,

“Ferber's proposal to bring all EU central counterparties and central securities depositories under ESMA removes the halfway house of a significance threshold. That sends a clear signal: the EU is building a single supervisor for post-trade infrastructure. Firms that clear or settle in the EU should start planning now for a single regulatory point of contact.”

Tiana Rambatomanga, Partner in Financial Services in Paris comments,

“Heinäluoma's proposals go well beyond market structure reform. Requiring at least 90% of securities lending revenues to flow back to the fund and barring funds from non-cooperative tax jurisdictions will force asset managers to rethink their distribution models. Firms with cross-border EU fund operations should review their revenue-sharing arrangements and domicile choices.”

Codrina Constantinescu, Partner in Financial Services in Luxembourg comments,

“Converting the Settlement Finality Directive into a directly applicable regulation removes the patchwork of national rules that firms and market infrastructure face today. Crosetto's amendments also open the door to distributed ledger technology for settlement on a permanent basis. Fund administrators and depositaries should assess how these changes will affect their settlement processes and collateral arrangements.”

Next steps

Other ECON members may table amendments by 16 July 2026. ECON plans to vote on its negotiating position on 1 December 2026. Talks with the Council and the Commission would then follow. The full process is likely to take at least a year.

How Eversheds Sutherland can help

Eversheds Sutherland advises asset managers, banks and market infrastructure firms in the United Kingdom, Luxembourg, Ireland and the EU. Our financial services team is following the MISP package as it moves through the European Parliament. 

We can:

• help you assess the impact on your business;
• review your supervisory and operating model;
• prepare your response through trade bodies;
• plan your move to the new regime.