BETTER FINANCE Responds to the European Commission’s Targeted Consultation on the Integration of EU Capital Markets
BETTER FINANCE welcomes the comprehensive examination that the European Commission is undertaking of the barriers that prevent the integration of EU capital markets. Further integration is essential to build deeper and more competitive EU capital markets, for the benefit of EU citizens as individual investors, as well as for financial and non-financial firms.
We emphasise that fair, transparent, and competitive EU capital markets require addressing persistent fragmentation, but especially opacity in both trading and post-trading layers. A level playing field between lit multilateral venues and bilateral execution channels — particularly Systematic Internalisers — is essential to restore price discovery and fairness in retail execution. Rising intermediation and internalisation divert retail orders from transparent venues; reforms must nudge brokers towards lit markets, supported by clearer best execution rules focused on price as the key retail benchmark, and improved venue access. Promoting total-EU index-based instruments (e.g. ETFs) can also help retail investors gain exposure to a broader range of shares — including smaller issuers — and channel liquidity to SME markets across borders.
While deeper cross-border integration and liquidity pooling are important goals, standardisation of trading protocols and easier broker connectivity should come first — before mandating stronger interconnection measures — to avoid placing disproportionate burdens on regulated markets. A more centralised and consistent EU-level supervision is essential to ensure uniform enforcement of market rules and to prevent (local) venue- or broker-specific and other trading systems loopholes. Transparent, lit markets (which list EU issuers and support primary capital formation) must remain at the heart of the Capital Markets Union. Their attractiveness, potentially via market-led consolidation should be encouraged, and targeted public funding may be considered to support the interconnection of lit venues and critical infrastructure, but only as a secondary step. We caution that any costs of such an initiative should not be borne by regulated markets alone, especially not when bilateral and internalised trading models continue to attract retail flows under less stringent conditions. Therefore, we deem post-trade harmonisation as a priority, since it is the most costly layer. We identify needs to improve CSD interoperability (or consolidation thereof), expanding direct access for brokers (leveraging T2S) and also ensuring stronger parallel implementation of SRD II and its review (in shareholder identification and rights transmission). These reforms are essential to reduce costs, improve transparency, and lower intermediation in the (lit) investment chain. For this, we stress that the European Commission must ensure alignment across relevant legislative initiatives and avoid siloed policymaking. Eventually, retail participation and capital markets depth will only grow if execution quality, transparency, and operational efficiency improve in parallel — reinforcing lit markets as the backbone of the Capital Markets Union and addressing bilateral venue risks through equivalent transparency and accountability requirements.
BETTER FINANCE supports the EU’s drive toward simplification and burden reduction across both asset management and capital market infrastructure — but stresses that these efforts must not come at the expense of proper risk assessment or reduce investor protection. A truly “proportional” approach must begin with a clear risk analysis and aim for financial stability and optimal outcomes for consumers, while also future-proofing financial markets, including by ensuring innovation and prolonging DLT pilot regime. Finally, BETTER FINANCE strongly supports more centralised and consistent EU-level supervision. Genuinely integrated capital markets require a uniformly implemented single rule book and agile, reactive supervisory action, not hindered by internal borders or divergent national practices.
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