Apostolos Thomadakis / May 2026
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The EU’s Markets Integration and Supervision Package (MISP) represents a major step away from harmonising rules towards integrating institutions and infrastructure. It rightly acknowledges the continued fragmentation of supervision, market infrastructure and cross-border operating conditions in the EU capital markets. MISP addresses real gaps of the Capital Markets Union (CMU) framework by empowering the European Securities and Markets Authority (ESMA), reducing national divergences and enhancing market infrastructure. But its ambition also leaves it open. By amending so many frameworks at once risks transitional complexity and institutional overload. MISP is necessary, but success will depend on implementation and the wider Savings and Investments Union (SIU) agenda.
The package comes at a time when the limitations of the financial system in Europe are becoming increasingly apparent: capital markets are still fragmented, cross-border activity is patchy, and savings are still not being effectively directed to productive investment that is appropriate to the economic and strategic needs of the Union. Yet fragmentation should not be treated as a catch-all explanation for every weakness in EU capital markets. Some forms of fragmentation reflect genuine barriers to cross-border scale, such as divergent supervision, settlement arrangements, taxation and insolvency rules. Others reflect diversity in market execution models, which may support liquidity, competition and investor choice rather than weaken integration.
MISP is therefore best understood as an institutional and infrastructural package. It seeks to reduce regulatory divergence, reinforce ESMA’s role, strengthen market infrastructure, ease cross-border activity and support technological development. This reflects the reality that Europe’s capital markets are fragmented across several layers. It also makes the package difficult to assess, as its main channel of change, likely effects and implementation demands are not always easy to isolate.
From rule harmonisation to supervisory architecture
For decades, EU capital markets integration has mostly depended on harmonised rules applied through national supervision. MISP accepts the limits of that approach. A single rulebook can narrow legal differences, but it cannot create truly integrated markets when supervisory practices remain divided.
The package therefore shifts the debate from rule-making to supervisory architecture. It reinforces ESMA’s convergence role, broadens coordination tools and moves selected supervisory tasks to the EU level, especially for systemically important infrastructures and cross-border actors. This is a useful acknowledgement that supervision has to develop alongside the markets it oversees.
But MISP is not a clean institutional redesign. It creates a layered model, with direct EU-level supervision in some areas, stronger coordination in others and national supervision continuing for most activities. Such a hybrid structure may improve consistency, but it can also blur responsibility. If several authorities continue to operate in the same market ecosystem, accountability, enforcement and crisis management need clear boundaries. The core question is therefore not whether supervision should become more integrated, but how far the EU is prepared to go.
Simplification through complexity
MISP also presents itself as a simplification exercise. It aims to cut national discretions, reduce gold-plating, simplify overlapping requirements and shift some provisions from directives into directly applicable regulations. In principle, this should make cross-border activity smoother, reduce compliance costs and provide a more predictable business environment.
The route chosen, however, is complex. The package changes at least 17 existing EU legislative instruments: the Master Regulation amends 14 regulations, the Master Directive revises three directives, and the Settlement Finality proposal repeals and replaces one directive while amending another (see Table 1).
Table 1. Legislative scope of the MISP package
|
Part of MISP |
Legal act amended/repealed |
|
Master Regulation |
ESMA Regulation ((EU) No 1095/2010) |
|
European Market Infrastructure Regulation (EMIR) ((EU) No 648/2012) |
|
|
Markets in Financial Instruments Regulation (MiFIR) ((EU) No 600/2014) |
|
|
Central Securities Depositories Regulation (CSDR) ((EU) No 909/2014) |
|
|
Securities Financing Transactions Regulation (SFTR) ((EU) 2015/2365) |
|
|
Cross-Border Distribution of Funds Regulation (CBDR) ((EU) 2019/1156) |
|
|
CCP Recovery and Resolution Regulation ((EU) 2021/23) |
|
|
DLT Pilot Regime Regulation ((EU) 2022/858) |
|
|
Markets in Crypto-Assets Regulation (MiCA) ((EU) 2023/1114) |
|
|
Credit Rating Agencies Regulation ((EU) No 1060/2009) |
|
|
Benchmarks Regulation ((EU) 2016/1011) |
|
|
Securitisation Regulation ((EU) 2017/2402) |
|
|
European Green Bonds Regulation ((EU) 2023/2631) |
|
|
ESG Ratings Regulation ((EU) 2024/3005) |
|
|
Master Directive |
UCITS Directive (2009/65/EC) |
|
Alternative Investment Fund Managers Directive (AIFMD) (2011/61/EU) |
|
|
Markets in Financial Instruments Directive II (MiFID II) (2014/65/EU) |
|
|
Settlement Finality proposal |
Settlement Finality Directive (98/26/EC) – repealed and replaced |
|
Financial Collateral Directive (2002/47/EC) - amended |
Source: Author’s elaboration.
This produces a real implementation paradox. A reform intended to simplify the market could, at least at first, add operational and legal complexity. Firms will have to update compliance systems and business models. National authorities will need to adjust to new coordination structures and, in some cases, a smaller role. ESMA will require resources, specialist expertise and institutional credibility to use its expanded powers effectively.
The package therefore cannot be assessed by legislative ambition alone. Its success will rest on sequencing, transition periods and disciplined Level 2 work. Without that, simplification may be clearer in the political message than in the everyday experience of market participants.
Fixing the pipes
One of MISP’s most convincing elements is its attention to market infrastructure. The package focuses heavily on trading venues, central counterparties, central securities depositories and settlement systems. That is a sound policy choice. The EU cannot build deep capital markets if the operating architecture stays fragmented.
This is particularly relevant for trading transparency. The objective should not be to force liquidity back into a single venue or execution model, but to ensure that market participants can see liquidity across the market. A robust consolidated tape is therefore central to the integration agenda as it would improve the visibility of trading activity across venues, support price formation and reduce informational fragmentation without reducing execution choice.
The proposed settlement finality reform is a clear example. Replacing the current directive with a directly applicable regulation should reduce national differences and improve legal certainty in cross-border settlement. But infrastructure reform has limits. Improved trading and post-trading arrangements can lower frictions, but they cannot on their own remove tax barriers, divergent insolvency regimes, fragmented shareholder rights or weak investor participation. MISP improves the pipes. It does not ensure that more capital will move through them.
Can regulation create deep markets?
A key assumption behind MISP is that reducing regulatory and supervisory barriers will help firms operate across borders, achieve scale and deepen liquidity. This is credible. Fragmentation increases costs, restricts cross-border activity and stops firms and infrastructures from making full use of the single market.
But regulation alone does not create scale. It also depends on the investor base, how household savings are allocated, pension systems, institutional investment capacity and national tax incentives. Other parts of the SIU agenda deal more directly with these issues, including retail participation, savings and investment accounts, supplementary pensions and market-based financing.
MISP should therefore be viewed as one component of the SIU architecture, not as a complete answer by itself. Its job is to improve the supply-side and infrastructure conditions that make integration possible. Other SIU measures need to strengthen demand. If these strands support each other, the package could make a real contribution. If they stay disconnected, Europe may gain more efficient market infrastructure while still lacking sufficient market depth.
Innovation, distribution and unfinished integration
MISP also includes an innovation strand, particularly through distributed ledger technology, tokenisation and changes to the DLT Pilot Regime. That has value. Legal certainty and technological neutrality are needed if new forms of trading, settlement and asset representation are to grow inside the EU rather than abroad. Yet innovation is not the package’s centre of gravity. MISP is mainly about market integration, supervision and infrastructure. Its digital finance provisions are better seen as supporting measures, designed to prevent new technologies from reproducing old fragmentation.
The effects of integration will also not fall evenly. Larger firms, infrastructures and asset managers may benefit most from lower fragmentation and more consistent supervision. Smaller or nationally focused actors may benefit over time, but could face adjustment costs and stronger competition. Institutionally, MISP strengthens ESMA and narrows the space for divergent national practices. This may improve consistency, but it also shifts influence away from national authorities. The task is to preserve accountability, market knowledge and supervisory proximity while reducing fragmentation.
Finally, MISP cannot complete the capital markets agenda by itself. Many of the most difficult barriers to cross-border investment lie outside financial regulation: taxation, insolvency, corporate law, securities law and shareholder rights. These areas are politically hard because they touch national legal traditions, fiscal sovereignty and domestic institutional structures. Still, they remain central to how investors assess risk, how companies raise finance and how capital is allocated across borders.
Conclusion
MISP is a major step in EU capital markets policy. Its main contribution is institutional. It tries to make integration more deliberate by lowering regulatory divergence, strengthening supervisory consistency and improving market infrastructure.
At the same time, its breadth creates risk. By amending many frameworks in one move, MISP may produce the complexity it is meant to reduce, at least during the transition. It will need careful sequencing, clear implementation guidance and enough supervisory capacity, especially within ESMA.
The limits are just as clear. MISP will not, on its own, create deep and liquid European capital markets. That will depend on whether the wider SIU agenda can mobilise savings, widen investor participation and address the legal and fiscal barriers that still fragment investment flows.
The risk is that Europe creates a more integrated framework without achieving fully integrated markets. The opportunity is for MISP to become the institutional backbone of a broader reform strategy. Its success should therefore be judged not only by whether it removes technical barriers, but by whether it helps turn the SIU from a policy ambition into a working market reality.
