Matheson EU Legislative Insights
Expert analysis of the EU legislation shaping Ireland’s Presidency agenda.
Matheson EU Legislative Insights is a fortnightly update focusing on key aspects of the legislative agenda during the course of Ireland’s Presidency of the Council of the European Union.
Every two weeks, Matheson experts will review a key piece of legislation to provide an “at-a-glance” summary of its strategic context, objectives and implications. Should you have any queries in respect of the contents of the update, please do not hesitate to contact your usual Matheson LLP contact or any member of our team detailed below.
In focus: the Market Integration Package
What is the Market Integration Package?
On 4 December 2025, the European Commission published three legislative proposals under the banner of the Market Integration and Supervision Package (“MISP”). The package forms a central pillar of the Commission’s Savings and Investments Union (“SIU”) strategy – the successor to, and rebranded form of, the Capital Markets Union (“CMU”) agenda – and represents the most substantial single-market integration initiative in EU capital markets since MiFID II and MiFIR.
Despite previous attempts at reform under successive CMU Action Plans, EU capital markets remain fragmented. In 2024, EU stock market capitalisation represented approximately 73% of GDP, far below the equivalent US figure of 270%, reflecting persistent structural underdevelopment. The IMF has estimated that for financial services alone, internal barriers within the single market resemble a tariff exceeding 100%. The European Commission’s SIU strategy, unveiled in March 2025, identified market integration and efficient supervision as two of its four interconnected pillars, and the MISP directly addresses both.
The package comprises three legislative instruments.
- the Master Regulation[1] is a cross-cutting regulation amending a wide range of existing EU capital markets regulations: the ESMA Regulation, EMIR, MiFIR, CSDR, DLTPR, MiCAR, CCPRRR and CBDR, together with targeted amendments to the SFTR, CRAR, BMR, Securitisation Regulation, EU Green Bond Regulation and ESG Ratings Regulation.
- the Master Directive[2] amends the UCITS Directive, AIFMD and MiFID.
- the Settlement Finality Regulation[3] repeals and replaces the Settlement Finality Directive[4] and amends the Financial Collateral Directive[5].
The rationale for a combined omnibus approach reflects the European Commission’s assessment that fragmentation in EU capital markets is systemic and cross-sectoral. Piecemeal reforms have historically produced inconsistent supervisory frameworks and persistent barriers to cross-border activity. The MISP seeks to eliminate those barriers through a coherent horizontal reform, moving supervision of key market infrastructures to EU level and harmonising the regulatory framework across trading, post-trading and asset management. The European Commission is seeking to reduce fragmentation in trading infrastructures, post-trading infrastructures and asset management, as well as to remove cross-border barriers, enhance supervision and update the framework for new technologies.
You can read more about the MISP in our previous insight here.
Legislative references
Title | Reference | |
| 1 | “Master Regulation” – Proposal for a Regulation of the European Parliament and of the Council on the further development of capital market integration and supervision within the Union | COM(2025) 943 final, 2025/0383(COD) |
| 2 | “Master Directive” – Proposal for a Directive of the European Parliament and of the Council on the further development of capital market integration and supervision within the Union | COM(2025) 942 final, 2025/0382(COD) |
3 | “Settlement Finality Regulation” – Proposal for a Regulation of the European Parliament and of the Council on settlement finality | COM(2025) 941 final, 2025/0381(COD) |
4 | “Financial Collateral Directive” – Directive of the European Parliament and of the Council of 19 May 1998 on settlement finality in payment and securities settlement systems | Directive 98/26/EC |
5 | “Settlement Finality Directive” – Directive of the European Parliament and of the Council of 6 June 2002 on financial collateral arrangements | Directive 2002/47/EC |
At a glance: the Market Integration Package
| What it is | A legislative package aimed at deepening EU capital market integration and strengthening supervisory convergence. It is comprised of three legislative proposals: a Master Regulation amending multiple existing EU capital markets regulations, a Master Directive amending existing directives (UCITS Directive, AIFMD and MiFID), and a new Settlement Finality Regulation repealing the Settlement Finality Directive and amending the Financial Collateral Directive. |
| The legal instruments | (1) Master Regulation (2025/0383(COD)) amending the ESMA Regulation, EMIR, MiFIR, CSDR, SFTR, CCPRRR, DLTPR, CRAR, BMR, Securitisation Regulation, EU Green Bond Regulation, ESG Ratings Regulation, MiCAR and CBDR; (2) Master Directive (2025/0382(COD)) amending UCITS Directive, AIFMD and MiFID; and (3) Settlement Finality Regulation (2025/0381(COD)) repealing Directive 98/26/EC and amending Directive 2002/47/EC on financial collateral arrangements. |
| Common name | “Market Integration Package” or “Market Integration and Supervision Package” (“MISP”). |
| Who it targets | The MISP impacts numerous stakeholders. Some stakeholders, such as the operators of trading venues, are directly impacted while others, such as investors in financial instruments, are indirectly impacted. Impacted stakeholders include trading venues, central counterparties (“CCPs”), central securities depositories (“CSDs”), crypto-asset service providers (“CASPs”), asset managers (UCITS management companies, AIFMs), investment firms, lending institutions and consumers. |
| Proposal date | European Commission proposals published on 4 December 2025. |
| Current stage | The MISP is currently under review by the Council of the EU and the European Parliament. Proposals for the MISP were published on 4 December 2025. The Council of the EU work then commenced in the Financial Services and Banking Union Working Party. In the European Parliament, ECON Committee draft reports were published on 12 June 2026 by rapporteurs Ferber (Master Regulation), Heinäluoma (Master Directive) and Crosetto (Settlement Finality Regulation). An ECON committee vote is expected in December 2026. |
| Key institutional lead | Commissioner Maria Luís Albuquerque (EPP / Portugal) |
| Key Matheson Contacts | Vincent McConnon, Brónagh Maher and John Adams |
Who is impacted by the MISP?
Given the breadth of these legislative proposals, it is unsurprising that numerous stakeholders are impacted by the MISP. Some stakeholders, such as the operators of trading venues, are directly impacted while others, such as investors in financial instruments, are indirectly impacted. Those impacted include the following:
- Trading venues and market infrastructure – regulated markets, multilateral trading facilities, CCPs and CSDs whose supervisory landscape would shift materially, including potential transfer of direct supervision of significant market infrastructures to ESMA;
- Asset managers – UCITS management companies and AIFMs affected by amendments to the UCITS Directive and AIFMD, particularly on cross-border distribution, passporting and depositary rules;
- MiFID investment firms and brokers – firms active in trading and post-trading affected by amendments to MiFIR and MiFID;
- Crypto-asset service providers (“CASPs”) – subject to proposed transfer of supervisory competence from national competent authorities (“NCAs”) to ESMA under MiCAR;
- Lending institutions including banks and credit unions – intended to benefit from the potential for broader capital market access for consumers;
- NCAs responsible for supervision across EU Member States, whose competences would be partially transferred to ESMA in respect of significant market infrastructures and CASPs; and
- European consumers and investors – intended to benefit from lower costs, greater choice and broader access to capital market investment opportunities as integration deepens.
The package has been broadly welcomed by policymakers in both the European Parliament and the Council of the EU. Work in the Council of the EU’s Financial Services and Banking Union Working Party commenced promptly after publication. In the European Parliament, ECON Committee draft reports were published on 12 June 2026, with rapporteur Ferber (Master Regulation) calling for greater ambition, rapporteur Heinäluoma (Master Directive) welcoming the measures but seeking a stronger ESMA supervisory role, and rapporteur Crosetto (Settlement Finality Regulation) welcoming the conversion of the Settlement Finality Directive into a directly applicable regulation. The real political challenge will centre on the extent of ESMA’s expanded supervisory powers and EU member State willingness to cede national supervisory competences.
What are the key legal and political challenges?
The scope of ESMA’s expanded supervisory powers is the central political tension. The proposal to transfer direct supervisory competences over significant trading venues, CCPs and CSDs, and all CASPs, to ESMA materially reduces the role of NCAs. Several EU member states are reluctant to cede national supervisory authority, even as they acknowledge the fragmentation problem that national approaches have created. The calibration of the boundary between ESMA direct supervision and NCA competence will be one of the most contested issues in both European Parliament and Council of the EU negotiations. Rapporteur Ferber has called for ESMA’s supervisory mandate to be extended even further, including the direct supervision of all EU CCPs and CSDs, not just significant ones as proposed by the European Commission.
National transposition of the Master Directive creates a risk of divergent implementation. Unlike a regulation (which applies directly), the Master Directive must be transposed by all 27 EU member states. Given the political sensitivity of key provisions, particularly on ESMA powers and cross-border fund distribution, there is a material risk that EU member states use transposition flexibility to implement the directive in ways that reflect national supervisory preferences, potentially perpetuating the very fragmentation the MISP seeks to eliminate.
The omnibus structure creates complex interaction effects. As the Master Regulation and Master Directive simultaneously amend much existing legislation (including EMIR, MiFIR, CSDR, UCITS Directive, AIFMD and MiFID), the package introduces layers of interaction between different regulatory regimes. Firms operating across multiple sectors will need to map the cumulative effect of amendments across their regulatory frameworks. Inconsistencies or gaps in how the amendments interact may only become apparent during national transposition of the Master Directive.
The proposed transfer of CASP supervision to ESMA raises transitional complexity. Under the proposed Master Regulation, supervisory competence over CASPs would transfer from NCAs to ESMA 24 months after the regulation’s entry into force. Firms with applications currently being processed by NCAs will need clarity on transitional arrangements.
DLT and tokenisation provisions must keep pace with rapidly evolving markets. The DLTPR amendments seek to encourage adoption of distributed ledger technology, but the tokenisation of financial assets is accelerating regardless of regulatory timelines. The risk is that the legislative framework, however ambitious, may already be playing catch-up with market developments by the time it is adopted.
The settlement finality framework must balance legal certainty with technological neutrality. The conversion of the Settlement Finality Directive into a directly applicable Regulation aims to harmonise definitions and settlement finality moments across EU member states. However, achieving genuine technology neutrality to accommodate DLT-based recording and tokenised instruments alongside conventional market infrastructure is a significant regulatory design challenge. Rapporteur Crosetto has proposed amendments to ensure the framework is technology-neutral and operationally workable.
The ESMA governance reform will face scrutiny. The European Commission proposes a new Executive Board for ESMA. Rapporteur Ferber has proposed that this Executive Board have five independent members with double voting rights in the Board of Supervisors, a significant governance change that EU member states may resist due to concerns regarding reduced influence over ESMA’s institutional operation.
