In its latest Occasional Paper released on Monday, the ECB says a stronger EU-level supervisory framework is needed to address fragmentation and better reflect increasingly cross-border market activity.

While this would move the EU towards a more coherent system, the central bank stresses it would not replicate the more centralised model in the United States.

"The complexity in Europe has no equivalent in the United States," the authors of the paper state.

Capital markets supervision in the EU is currently split across 52 national authorities, creating what the ECB describes as a patchwork system with no single body overseeing cross-border risks.

It contrasts this with banking supervision, which has been centralised since 2014 under the Single Supervisory Mechanism.

US comparison highlights structural gap

The ECB contrasts the EU framework with the US model, where capital markets are supervised at federal level by the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC).

The SEC oversees securities markets, while the CFTC is responsible for derivatives including futures and swaps, creating a clearer allocation of responsibilities.

In the EU, supervision remains largely national, with ESMA focused on coordination rather than direct oversight.

The ECB says this distinction is particularly important in derivatives markets, where risks are concentrated and highly interconnected.

Focus on clearing risks

Central counterparties are identified as a key pressure point. Data in the paper show that Eurex Clearing and LCH SA collected average daily margins of around €74bn (£64.3bn) and €40bn respectively between Q2 2024 and Q1 2025, compared with an EU average of roughly €10bn.

"These entities combine large size with strong cross-border relevance," the paper states.

Under current rules, CCPs are supervised by national authorities through EMIR colleges, with ESMA playing a supporting role. The ECB argues this results in duplication and inconsistent supervisory outcomes, particularly for model approvals.

Interoperability links between CCPs add further complexity. Connections such as those between LCH SA and Euronext Clearing create channels for contagion, while no single authority has a consolidated view of exposures.

"Supervisory decisions taken in one jurisdiction can have immediate EU-wide implications."

Fragmented market structure

The ECB situates derivatives supervision within a broader issue of fragmented market structure. The EU currently has close to 500 execution venues, significantly more than the United States despite a smaller market.

While increased competition has reduced trading costs, the ECB says excessive fragmentation weakens liquidity and price formation.

"Multiple venues can be beneficial, but beyond a certain threshold they disperse order flow and weaken price discovery."

Crypto supervision gap

Crypto-asset service providers present a similar challenge. Although regulated under MiCAR, CASPs are authorised and supervised nationally despite operating across borders.

As of November 2025, 94 CASPs had been authorised, with 62 planning to operate in at least seven Member States and 47 targeting EU-wide activity.

Many are also embedded within broader financial groups, increasing complexity and interlinkages.

The ECB warns that national supervision risks creating inconsistencies and regulatory arbitrage, arguing that centralising oversight would allow expertise to be built at EU level.

Targeted shift to EU supervision

Rather than full centralisation, the ECB proposes a targeted approach focused on large cross-border entities.

Around five to six CCPs, alongside major central securities depositories and trading venue groups, could fall under direct EU supervision, while national authorities would retain oversight of smaller firms.

For crypto markets, the ECB suggests a more centralised model could be applied from the outset.

The central bank also backs the creation of an independent ESMA Executive Board with enforcement powers, arguing that decision-making should be insulated from national interests.

Implications

For derivatives markets, the proposed changes could streamline supervisory processes and improve consistency in risk oversight.

For large firms, a single EU supervisor would act as a single interlocutor, reducing compliance complexity.

A centralised framework would also improve visibility over cross-border exposures and interconnected risks.

The ECB links these reforms to broader capital markets integration, arguing that fragmented supervision remains a structural barrier.

"Harmonised rules alone cannot ensure a genuinely integrated market if supervision remains fragmented."

It adds that reform can deliver progress without waiting for harmonisation of tax, insolvency or company law, warning that delaying action risks missing a critical window for integration.

The ECB also warned last week that the latest energy shock linked to the conflict in Iran could have disproportionate effects on inflation, as policymakers assess the impact of rising geopolitical tensions on the euro area economy.

The comments come after ECB vice-president Luis de Guindos said earlier this month that energy prices are expected to peak in the second quarter of 2026 before declining, although alternative scenarios point to more prolonged disruption depending on the evolution of the conflict.