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The European Commission is drawing up plans to expand central supervision over key financial markets infrastructure, including stock exchanges, crypto exchanges and clearing houses, in an effort to eliminate fragmentation in one of the single market’s core areas.
The move is part of a broader effort to bolster the EU competitiveness in relation to the US by ensuring that companies can access funding and scale up on the continent rather than across the Atlantic. The current landscape, with dozens of national and regional regulators and hundreds of trading and post-trading institutions, raises the costs for cross-border trades, a significant obstacle for start-ups to scale up in Europe.
A single supervisor modelled after the Securities and Exchange Commission in the US is seen as a significant step to completing the EU’s “capital markets union”. The move is backed by ECB President Christine Lagarde and her predecessor Mario Draghi, who mentioned this in a report he drafted last year on improving Europe’s competitiveness.
The commission has said it will put forward proposals in December for a “markets integration package”.
The most contentious idea is to expand the powers of the existing European Securities and Markets Authority (Esma) to also cover “the most significant cross-border entities”, including stock exchanges, crypto assets service providers, and post-trading infrastructure such as central clearing counterparties and central securities depositories, according to people briefed on the matter.
The commission will also call for Esma to have the last say on disputes between large asset managers. While not directly in charge of supervision, Esma would issue binding decisions in case of disputes between national supervisory authorities, the people said.
Central supervision has long been opposed by Berlin, but the government led by Chancellor Friedrich Merz has recently signalled openness and is exploring options together with France, a strong backer of the capital markets union. The Financial Times previously reported that the asset management industry was among the areas where the German government could envisage Esma supervision, but not crypto exchanges.
Other capitals, notably Luxembourg and Dublin, are still balking at the idea of handing over oversight powers to the Paris-based authority. They argue that the move could disadvantage their national financial sector, as they remain sceptical that EU regulators would act in the best interests of smaller nations.
“We would like to have [supervisory] convergence rather than creating a costly and ineffective centralised model,” said Gilles Roth, Luxembourg’s finance minister.
One European exchange group said it saw little benefit in shifting oversight of crypto assets service providers to Esma, citing a good working relationship with its national supervisor, and expressing concerns about higher compliance costs and potential Esma over-reach.
“Expanding Esma’s supervisory responsibilities would mean higher fees paid by the industry,” said Marin Capelle, policy adviser at Efama, the fund industry lobby.
The commission said it was “still exploring the potential of EU level supervision in relation to some critical infrastructures, such as central counterparties, central securities depositories and trading venues, as well as in relation to big cross-border entities such as asset managers”.
“We are considering different models for single supervision . . . from the perspective of balancing the EU interest with local expertise,” it added.
Additional reporting by Florian Müller in Frankfurt