3. Key features of the proposal

Why are you proposing more competences for ESMA?

Well-integrated capital markets are essential for the financing of the EU’s real economy, essential for a well-functioning Capital Markets Union and act as important shockabsorbers in the Economic and Monetary Union. Integrated capital markets facilitate private risk-sharing across borders, while conversely also reducing the potential need for public risk-sharing. More integrated supervision at EU level also means fewer costs and obstacles for financial firms that wish to expand within the EU and more choice for consumers. In addition, integrated supervision reduces the risk of regulatory arbitrage, ensuring the same standard of supervision for non-EU players who can also benefit from a single point of entry in the EU.

On this basis, the Commission is proposing to extend ESMA’s direct supervision to some specific areas of capital markets. In particular, ESMA will directly supervise specific sectors which are highly integrated, have important cross-border activities and which are, in most cases, regulated by directly-applicable EU law.

At the same time, the Commission is not proposing to change the responsibilities of national authorities to supervise other areas such as central depositories, money market funds, trading venues, UCITS or alternative investment funds. The Commission is proposing to entrust ESMA with the following direct supervisory powers:

Critical benchmarks

These are indices or indicators used to price financial instruments and financial contracts or to measure the performance of an investment fund. ESMA will supervise benchmarks that are deemed to be critical (such as EURIBOR and EIONIA) and will also endorse all nonEU benchmarks used in the EU.

Data reporting services

Data reporting service providers enable the reporting of transactions in financial instruments to regulators and the market. Centralising the authorisation and supervision of these operators, required by MiFID II, in ESMA will reduce fragmentation and costs and should ensure the same quality and reliability of data across the EU.

Market Abuse

ESMA will have a greater coordinating role in market abuse cases. It will have the right to act in specific cases, where certain orders, transactions or behaviour give rise to well-founded suspicion and have cross-border implications for the integrity of financial markets or financial stability in the EU. ESMA will be able to recommend that authorities in the Member States concerned initiate an investigation and exchange relevant information among each other and with ESMA. These new powers are in line with ESMA’s mandate to ensure the orderly functioning of markets and financial stability.