The trade body said it supports the package as a central part of the Savings and Investments Union agenda, but argued reforms will only succeed if they reduce fragmentation and improve legal certainty.

“FIA supports strengthened EU capital markets. The proposed reforms to the supervisory framework will require careful calibration to ensure that increased centralisation does not give rise to overlapping mandates, additional supervisory layers or unintended compliance burdens that could undermine competitiveness,” said Jacqueline Mesa, chief operating officer and senior vice president of global policy at FIA.

The paper focuses on proposed changes to the European Securities and Markets Authority (ESMA) Regulation, the European Market Infrastructure Regulation (EMIR) and the settlement finality regime, with particular emphasis on clearing, supervisory convergence and innovation.

CCP oversight and ESMA powers in focus

FIA said some greater centralisation could benefit large pan-European market operators by reducing supervisory fragmentation, but warned that the proposed framework risks creating a more complex structure if national authorities, ESMA and central banks all retain overlapping roles.

In clearing, the association said changes under EMIR could leave significant EU central counterparties dealing with several supervisors at once, undermining the package’s stated goal of simplification.

This comes as EU regulators continue to push for a more integrated clearing framework. Speaking at the ISDA Annual Legal Forum earlier this year, Nicoletta Giusto, director for central counterparties at ESMA, said EMIR 3 marks a significant shift in the region’s approach to clearing and supervision.

“Structural shifts are reshaping our market. New participants, innovative products and evolving service model are redefining the status quo,” she said. “All of this is happening against the complex geopolitical backdrop, which adds urgency and weight to our work.”

Giusto also backed stronger EU-level oversight of clearing infrastructure, saying: “One of the strongest case for EU level supervision, in my view, relates to Pan European infrastructures such as the CCP.

“By contrast, multiple layered supervision often means multiple processes, slower decision making and diluted accountability.”

Instead, FIA recommended models that provide EU CCPs with a single supervisory interface, such as ESMA’s CCP Supervisory Committee, while preserving meaningful input from national competent authorities and central banks of issue.

The group also objected to proposals that would remove ESMA’s explicit power to issue Q&As. FIA said this would weaken legal certainty and supervisory convergence, particularly in fast-moving and technical markets where firms rely on timely clarification of Level 2 requirements.

Push for stronger no-action powers and competitiveness test

The FIA also called for stronger and more flexible no-action powers for ESMA, arguing that the current proposals remain too narrow to deal with implementation problems, sequencing issues between Level 1 and Level 2 rules, and major market developments.

The paper said ESMA should be able to provide more timely relief or guidance where rules prove difficult to implement in practice. FIA also argued that the European Commission should, in limited and clearly defined cases, be able to temporarily pause Level 1 obligations when serious implementation problems arise.

The association further recommended giving ESMA a secondary objective to consider the competitiveness of EU markets when drafting technical standards and guidance.

The FIA said this would help ensure the impact of detailed rule-making on globally interconnected markets is taken into account, without weakening ESMA’s primary goals of financial stability, market integrity and investor protection.

DLT and settlement reform

On market infrastructure, FIA said EMIR should be updated to reflect wider EU reforms related to distributed ledger technology.

The association called for the clearing framework to be aligned with changes to MiFID and CSDR so that CCPs can accept tokenised collateral, including wholesale central bank digital currency, subject to existing eligibility and risk management standards.

The FIA argued that such changes are necessary if the EU wants to remain competitive as other jurisdictions move ahead with digital asset and tokenised collateral frameworks.

The paper also welcomed the proposed conversion of the Settlement Finality Directive into a regulation, saying this should reduce national divergence, forum shopping and legal uncertainty. However, FIA said the draft still contains technical and legal inconsistencies, including around the treatment of third-country systems, the definition of participants, collateral, netting and transfer orders.

The group said further amendments are needed to ensure clearing and settlement arrangements receive consistent legal protection and that market participants are not exposed to uncertainty through gaps in the framework.

FIA added that meaningful stakeholder engagement and robust impact assessment will be essential as negotiations on the package progress.

The comments reflects broader global concerns around regulatory clarity as derivatives markets expand. FIA president and chief executive Walt Lukken last month said rapid growth in exchanges, clearinghouses and new asset classes, including crypto and prediction markets, is increasing pressure on regulatory frameworks, adding: “The markets have asked for, and need, a crypto market structure bill.

During his opening remarks at the FIA Global Cleared Markets Conference in Boca Raton last month, Lukken called for greater regulatory clarity around prediction markets, arguing that the rapidly growing sector needs clear rules to support responsible development.