2021 capital markets union package

2021 capital markets union package – an overview

On 25 November 2021, the European Commission published the first capital markets union package. It consists of four legislative proposals:

• a single access point for investors, the European single access point (ESAP)
• a review of the regulation on European long-term investment funds (ELTIFs)
• a review of the alternative investment fund managers directive (AIFMD)
• a review of the markets in financial instruments regulation (MiFIR) and the markets in financial instruments directive (MiFID II)

The package followed up on the Commission’s capital markets union action plan of 2020, which proposed 16 legislative and non-legislative activities to achieve three key objectives:

• support a green, digital, inclusive and resilient economic recovery by making financing more accessible to European companies
• make the EU an even safer place for individuals to save and invest in the long term
• integrate national capital markets into a genuine single market

The first capital markets union action plan was put forward in 2015, in the wake of the 2011 financial crisis.

• 2021 capital markets union package (European Commission)
• 2020 capital markets union action plan (European Commission)

Improving investors’ access to data

The European single access point (ESAP) will offer free, user-friendly and digital access to public financial and sustainability-related information about EU companies and investment products in one place. The ESAP aims to facilitate the decision-making process for a broad range of investors, including retail investors, and to give companies, especially small ones, more visibility.

Council and Parliament negotiators reached a provisional agreement on the new rules on 23 May 2023. The Council adopted the regulation on 27 November 2023.

The ESAP platform is expected to be available from the summer of 2027 and will be gradually phased in to ensure its proper implementation.

• Council adopts regulation easing access to corporate information for investors (press release, 27 November 2023)
• Easy access to corporate information for investors: Provisional agreement reached on the European Single Access Point (ESAP) (press release, 23 May 2023)

Encouraging long-term investment

The EU regulation on European long-term investment funds (ELTIFs) aims to facilitate investment – through alternative investment funds – in longer-term assets that can be distributed on a cross-border basis to both professional and retail investors.

ELTIFs can help finance the green and digital transitions. They can be an important vehicle for channelling financing to SMEs and long-term projects such as transport and social infrastructure or sustainable energy generation and distribution.

Negotiations with the European Parliament on the review of the EU framework ended in agreement in October 2022. The Council formally adopted the new rules on 7 March 2023.

• Capital markets union: Council adopts revised framework for European long-term investment funds (press release, 7 March 2023)
• European long-term investment funds: Provisional agreement reached (press release, 19 October 2022)

Alternative investment fund managers directive

The alternative investment funds managers directive (AIFMD) governs managers of hedge funds, private equity funds, real estate funds and a wide range of other alternative investment schemes in the EU.

The review aims to better integrate the Alternative Investment Funds (AIFs) market, improve investor protection and companies’ access to more diversified forms of financing, as well as to strengthen managers’ ability to deal with liquidity pressure in stressed market conditions.

The new rules also modernise the framework for Undertakings for Collective Investment in Transferable Securities (UCITS), i.e. plain-vanilla EU-harmonised retail investment funds such as unit trusts and investment companies.

The Council and the Parliament reached a provisional agreement on the new rules on 20 July 2023. The Council adopted the new rules on 26 February 2024.

• Capital markets union: Council adopts new rules on alternative investment fund managers and plain-vanilla EU investment funds (press release, 26 February 2024)
• Capital markets union: provisional agreement reached on alternative investment fund managers directive and plain-vanilla EU investment funds (press release, 20 July 2023)

Enhancing transparency on capital markets

The markets in financial instruments regulation (MiFIR) and the second markets in financial instruments directive (MiFID II) are the main pieces of EU legislation regulating investment services and financial market activities.

The review of this regulatory framework includes the establishment of EU-level consolidated tapes for shares, bonds, exchange-traded funds (ETFs) and derivatives, to increase market transparency and facilitate access to market data. As a result, investors will have access to up-to-date transaction information for the whole of the EU.

The new rules also impose a general ban on ‘payment for order flow’ (PFOF), a practice through which brokers receive payments for forwarding client orders to certain trading platforms. The review also introduces new rules on commodity derivatives.

The Council and the Parliament reached a provisional agreement on this matter on 29 June 2023. The Council adopted the changes to the EU’s trading rules on 20 February 2024.

• MiFIR and MiFID II: Council adopts new rules to strengthen market data transparency (press release, 20 February 2024)
• Capital markets union: Council and Parliament agree on proposal to strengthen market data transparency (press release, 29 June 2023)