EU ministers reach watered down compromise on centralised cap markets supervision

EU Reaches Compromise on Centralised Capital Markets Supervision and ESMA Oversight

EU Finance Ministers Agree on Scaled-Back Supervision Plan

By Jan Strupczewski

Background and Objectives of the Deal

BRUSSELS, Oct 9 (Reuters) - European Union finance ministers agreed on Friday a scaled-back compromise to centralise supervision of most EU stock exchanges, central counterparties and securities depositories as they seek to make the EU capital markets work better.

The deal aims to reduce the fragmentation of 27 different legal systems government capital flows and make the EU more attractive to innovative companies, which now often choose to relocate to the United States.

Original Proposal vs. Compromise

But it differs from the original proposal for the Market Integration and Supervision Package made by the European Commission. That envisaged all stock exchanges, large central counterparties (CCPs) and central securities depositories (CSDs) being supervised by the European Securities and Markets Authority (ESMA) in Paris, rather than by national authorities as now.

"People can hold out for the perfect, or people can hold hands and jump together with the good," said Simon Harris, finance minister of Ireland, who was in charge of negotiating the compromise.

Purpose of a Single Supervisor

The idea behind the single supervisor was to help apply the same EU laws in the same way across all countries, eliminating national interpretations to reduce costs and bureaucracy.

Key Points of the Compromise

Exemptions and Criteria

But Germany refused to support the proposal unless its Deutsche Boerse stock exchange remained under local German supervision. The compromise introduces trading thresholds and geographical footprint criteria that would allow the German stock exchange to be exempt from ESMA oversight.

The criteria also exclude Swiss exchange operator SIX Group, which has the Madrid bourse and Aquis, as well as French-owned Tradition and Deutsche Boerse-owned electronic trading platform Tradegate.

Entities Affected by the Changes

The compromise also removed three out of the original nine CCPs from under ESMA's jurisdiction — the Dutch CBOE Clear, Spain's BME and Sweden's Nasdaq Clearing.

The initial 15 CSDs that were to fall under ESMA were reduced to 13, with Spain's Iberclear and the Baltic's Nasdaq CSD removed. Only between 10 to 15 from around 360 crypto-asset service providers in the EU will be subject to ESMA oversight, officials said.

Concessions for Smaller Countries

Smaller EU countries also won concessions that give national supervisors greater influence in ESMA decision-making.

Next Steps

Negotiations on the final shape of the law will continue with the European Parliament, once the EU legislature reaches its own position on the issue.

(Reporting by Jan Strupczewski; Editing by Emelia Sithole-Matarise)