FESE response to Commission consultation on integration of EU capital markets

The Federation of European Securities Exchanges (FESE) has provided thorough input to the European Commission’s consultation on the integration of EU capital markets which closed on 10th June 2025. In the current economic and geopolitical landscape, the EU must advance its competitiveness. Exchanges are at the backbone of strong capital markets to achieve a true Savings and Investment Union.

In this context, the Commission should prioritise key challenges and opportunities, coordinating closely with Member State policymakers. While we welcome the EU’s ambition to deepen its liquidity pools, it is important to underline systemic problems, such as limited demand for cross-border retail investment and the growth of bilateral trading. It is therefore essential to first identify and address the real gaps affecting the functioning and competitiveness of EU capital markets. Any initiatives should undergo a thorough assessment before being tabled, since several of the Commission’s proposals to integrate liquidity capital pools, as detailed in the consultation paper, are founded on a partial assessment of the issues contributing to the fragmentation of EU capital markets.

In our view, the path to larger and more integrated capital pools lies in increasing the overall size and depth of liquidity. To that end, the European Commission should focus on:

1. Stimulating investment and expanding capital pools through the introduction of demand-side measures;

2. Addressing the existing issues in the bilateral and dark trading space to tackle liquidity fragmentation and foster transparency in EU equity markets; and

3. Boosting an attractive listing ecosystem.

Simplification and burden reduction

• FESE welcomes the recent momentum behind the simplification agenda. There is a strong need for greater proportionality in EU legislative proposals to ensure regulations are appropriately tailored to their intended goals. Some existing frameworks, such as MiFID II/R, Market Abuse Regulation (MAR), DORA, CSDR and IFR would benefit from further refinements as they often impose excessive burdens on market participants.

Trading

• Access to trading: The real issue preventing increased cross-border trading does not lie in accessibility to lit multilateral trading venues or the connections between them. Lack of access to trading is not a problem for professional investors. For retail investors, the main barriers to cross-border investments stem rather from the embedded home bias, different tax and regulatory regimes, language-related challenges, limited research availability on certain foreign stocks and lack of financial knowledge. The Commission’s proposals under consideration do not seem to address these root problems and could have far-reaching effects, such as creating additional complexity and imposing unnecessary (high) costs on market participants and infrastructure, without delivering corresponding benefits.
• Dark vs. lit trading: The current regulatory framework for dark and bilateral trading is overly permissive. FESE strongly advocates for a review to enhance transparency and promote a level playing field with trading venues. Requiring retail orders to be executed on lit, multilateral venues should be considered, as it would enhance transparency and investor protection for retail investors, support price formation, and promote broader market integrity.
  Consolidated tape: The priority should be delivering an efficient and effective post-trade CT. By focusing on top-of-book and post-trade data, the CTP can deliver high-value, low-cost information that meets the needs of most users.
• Open access: FESE believes that the current open access provisions for equity markets strike the right balance between fostering competition and maintaining market stability. Furthermore, the current exclusion of exchange-traded derivatives (ETDs) from the open access provisions of MiFIR is crucial for financial stability and innovation and should be retained.

Supervision

• It is essential to foster legal certainty and regulatory coherence. Everyone recognises that NCAs are extremely important for the local financial ecosystems due to their proximity and expertise. At the same time, certain large and pan-European (i.e. multijurisdictional) trading venues often encounter challenges stemming from divergent supervisory practices, fragmented oversight, divergent interpretations of EU law, complexity, and increased compliance costs. Therefore, FESE advocates for consistent, efficient, and effective supervision, with identical supervisory outcomes.
• There is a need for certain Groups of trading venues to have the option to be recognised as such. This recognition should be designed as an opt-in framework, ensuring that requirements are adjusted to allow these venues to benefit from synergies within their group. Such recognition should also streamline supervisory processes and promote consistent regulatory outcomes across jurisdictions and the entities involved.

DLT Pilot Regime

• FESE supports the refinement of the DLT Pilot Regime (DLTPR) to foster innovation while ensuring legal and economic certainty. A key priority is guiding participants of the DLTPR through the transition out of the pilot phase when market size, volumes, and market risks increase, treating DLTP-licensed firms as regulated entities under CSDR, MiFID, and EMIR. Establishing clear regulatory pathways is essential for a predictable transition from the pilot phase (“sandbox”) to a modernised MiFID/MiFIR/CSDR frameworks (“real-world regulation”).
• FESE supports a regulatory framework that fosters innovation; however, a purely principles-based approach to DLTPR risks undermining predictability and could create challenges in the transition/graduation towards comprehensive, modernised regulation, such as CSDR and MiFID. We believe clear and well-defined rules remain essential to ensure stability and effective implementation.