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Study on consolidation and reducing fragmentation in trading and post-trading infrastructures in Europe Final report Written by Bourse Consult and Civitta September – 2025 EUROPEAN COMMISSION Directorate-General for Financial Stability, Financial Services and Capital Markets Directorate B Horizontal Policies Unit B1 Capital Markets Union E-mail: fisma.b1@eceuropaeu European Commission B-1049 Brussels EUROPEAN COMMISSION Study on consolidation and reducing fragmentation in trading and post-trading infrastructures in Europe Final report Directorate-General for Financial Stability, Financial Services and Capital Markets 2025 This study was carried out for the European Commission by Bourse Consult: György Dudás Hugh Simpson (Project Leader) Raymond Sabbah Civitta: Justas Kidykas Justė Pačkauskaitė Experts: Andrew Douglas Dr Jacek Dybiński Dr Kata Váradi Manuscript completed in August 2025 This document has been prepared for the European Commission however it

reflects the views only of the authors, and the European Commission is not liable for any consequence stemming from the reuse of this publication. Luxembourg: Publications Office of the European Union, 2025 European Union, 2025 The reuse policy of European Commission documents is implemented by Commission Decision 2011/833/EU of 12 December 2011 on the reuse of Commission documents (OJ L 330, 14.122011, p 39) Unless otherwise noted, the reuse of this document is authorised under a Creative Commons Attribution 4.0 International (CC BY 40) licence (https://creativecommonsorg/licenses/by/40/) This means that reuse is allowed provided appropriate credit is given and any changes are indicated. For any use or reproduction of elements that are not owned by the European Union, permission may need to be sought directly from the respective rightsholders. PDF ISBN 978-92-68-34358-6 doi: 10.2874/2649452 EV-01-25-010-EN-N Study on consolidation and reducing fragmentation in trading and

post-trading infrastructures in Europe Contents List of abbreviations . 8 Executive Summary . 11 1. Introduction . 18 1.1 Overview of methodology applied 19 1.2 Data sources and stakeholder engagement 19 1.3 Validation of the study’s results 21 2. History . 22 2.1 Setting the scene: European equity markets in the past 50 years 22 2.11 The changing nature of exchanges 22 2.12 European Monetary Union 23 2.13 Electronic trading 24 2.14 The introduction of CCPs 25 2.15 Vertical/horizontal market structures 25 2.16 American investment in European infrastructure 26 2.2 Current landscape 27 3. Issues in market structure . 30 4. Bringing Securities to Market . 36 4.1 Equities 38 4.2 Fixed income securities 42 4.3 Listed investment vehicles 42 4.4 Listing: conclusions 43 5. Trading . 44 5.1 Equities trading 46 5.11 Contributing to price formation 46 5.12 Not contributing to price formation 47 5.13 Retail trading 48 5.14 Publication of data 49 5.2 Issues in equity

trading 50 Page 5 of 195 Study on consolidation and reducing fragmentation in trading and post-trading infrastructures in Europe 5.3 ETFs 68 5.4 Fixed Income Trading 69 5.5 Consolidated Tapes 72 5.6 Market resilience 73 5.7 Trading: conclusions 73 6. Clearing . 76 6.1 CCP clearing in Europe 77 6.2 Alternative models for multi-market clearing 81 6.21 Interoperable clearing 81 6.22 Preferred clearing 83 6.23 No model 85 6.3 Clearing: options for enhancement 86 7. Settlement and safekeeping. 89 7.1 Functions of CSDs 93 7.2 Target-2 Securities (T2S) 98 7.3 The fragmented infrastructure 102 7.4 But (why) does this matter? Inefficiency in hard numbers 108 7.5 Case studies and what we can learn from them 110 7.51 Case study 1: Euroclear ESES markets – closer alignment of 3 CSDs 110 7.52 Case study 2: Baltic CSD – one legal entity to cover four countries, with local branch operations . 111 7.53 Case study 3: Ireland, a Member State without its own national CSD 113

7.54 Case study 4: Greece-Cyprus, a shared platform without corporate consolidation . 115 7.6 Digital infrastructure – High-level impact analysis 118 7.61 Trials 119 7.62 Regulation Supporting DLT 120 7.63 Conclusions and recommendations on DLT 121 7.7 Settlement and safekeeping: conclusions 121 8. Issues in the supervisory and regulatory structure. 124 9. Conclusions and Recommendations . 128 Page 6 of 195 Study on consolidation and reducing fragmentation in trading and post-trading infrastructures in Europe 9.1 The strategic goal 128 9.2 Strengthening the legal underpinnings for consolidation 130 9.3 An “Opt-in” Model for deeper and faster Capital Markets Integration 131 9.4 Immediate actions 140 Annex 1: Notes on competition cases . 144 Annex 2: Stakeholder interviews . 149 Annex 3: Survey responses . 152 Annex 4: References . 186 Page 7 of 195 Study on consolidation and reducing fragmentation in trading and post-trading infrastructures in Europe List of

abbreviations AFME Association for Financial Markets in Europe AIFMD Alternative Investment Funds Managers Directive AP Authorised Participants ATS Automated Trading System AUC Assets under custody BN Billion (109) CBDC Central Bank Digital Currency CCP Central Counterparty CEESEG Central and Eastern Europe Stock Exchange Group CLOB Central Limit Order Book CM Clearing Member (in a CCP) CMU Capital Markets Union CNS Continuous Net Settlement CSD Central Securities Depository CSDR Central Securities Depositories Regulation CTP Consolidated Tape Provider DBAG Deutsche Börse AG DG COMP European Commission Directorate-General for Competition DG FISMA Directorate-General for Financial Stability, Financial Services and Capital Markets Union DG MARKT European Commission Directorate-General Internal Market and Services (disbanded in 2014) DLT Distributed Ledger Technology DMO Debt Management Office DORA Digital Operational Resilience Act DTC

Depository Trust Company DTCC Depository Trust and Clearing Corporation DVCM Double Volume Cap Mechanism EBBO European Best Bid and Offer EC European Commission ECB European Central Bank ECMS Eurosystem Collateral Management System Page 8 of 195 Study on consolidation and reducing fragmentation in trading and post-trading infrastructures in Europe ECSDA European CSDs Association EEA European Economic Area ELP Electronic Liquidity Provider EMCF European Multilateral Clearing Facility EMIR European Market Infrastructure Regulation EMU European Monetary Union ESES Euroclear Settlement of Euronext-zone Securities ESMA European Securities and Markets Authority ETF Exchange-Traded Fund EU European Union FASTER Faster and Safer Tax Relief of Excess Withholding Taxes Directive FIDA Financial Data Access Regulation FIRDS Financial Instruments Reference Database System FMI Financial Market Infrastructure ICSD International Central Securities

Depository (Clearstream Banking SA, Luxembourg and Euroclear Bank) IPO Initial Public Offering IRM Incumbent Regulated Market LCH London Clearing House LEI Legal Entity Identifier LSE London Stock Exchange MAR Market Abuse Regulation MiFID I Markets in Financial Instruments Directive I MiFID II Markets in Financial Instruments Directive II MiFIR Markets in Financial Instruments Regulation MN Million (106) MTF Multilateral Trading Facility MTS Name of a government bond trading platform NBB National Bank of Belgium NCA National Competent Authority NCB National Central Banks NSCC National Securities Clearing Corporation NYSE New York Stock Exchange OEIC Open-ended Investment Company OFT Office of Fair Trading (UK) Page 9 of 195 Study on consolidation and reducing fragmentation in trading and post-trading infrastructures in Europe OTC Over the counter PFOF Payment for Order Flow REG NMS SEC Regulation National Market System RELTWA

Time-weighted mean bid-ask spread of the day, given in basis points relative to the time-weighted mean mid-point price RM Regulated Market SEC Securities and Exchange Commission SECMA Single European Capital Markets Area SFD Settlement Finality Directive SI Systematic Internaliser SIU Savings and Investment Union SLA Service Level Agreement SME Small to Medium-sized Enterprise SSE Single Settlement Engine SSIS Standing Settlement Instructions SSS Securities Settlement System SVC Single Volume Cap T2S TARGET-2 Securities TN Trillion (1012) UCITS Undertakings for Collective Investment in Transferable Securities Page 10 of 195 Study on consolidation and reducing fragmentation in trading and post-trading infrastructures in Europe Executive Summary EU capital markets will not succeed in their current structure and require reform. Savings and Investment Union will only achieve its goal of increasing investors’ and issuers’ participation by growing both

the demand for and the supply of investment solutions. However, the EU capital market's market infrastructure is inefficient and costly, and its inherent complexity does not support these goals. The overarching objective remains the development of an integrated European market infrastructure aligned with the SIU’s goals. A decisive change is required to transition to a simplified infrastructure based on the principles of competition, interoperability and resilience. Achieving this goal requires not only technical and operational progress but also substantive legal harmonisation across EU Member States to address the persistent fragmentation in trading and post-trading services. The basic principles have, in large part, been identified historically in studies beginning with the Giovannini Report in 2001. Still, progress in agreeing and implementing them has been slow, especially in the areas of tax and securities law. The findings in this study are based on approximately 100

interviews with market infrastructure providers, market participants, and public authorities, completed by a structured survey. One of the dominant findings of the Study is that persistent national legal barriers remain among the most significant obstacles to the further development of EU capital markets. These barriers create operational frictions in cross-border business, adding costs, complexity, and legal uncertainty for securities transactions. Market participants repeatedly emphasised that the fragmentation of legal frameworks impedes their daily operations and undermines the efficiency of post-trade processes. Below is a summarised series of options for action to create a market infrastructure to support SIU, followed by the key findings of our analysis. Single European Capital Markets Area as an “Opt-in” model for deeper and faster integration We propose the creation of the Single European Capital Markets Area (SECMA) as a phased, opt-in model for deeper and faster capital

markets integration. Given the urgent need for progress and the history of delay caused by the search for consensus, we believe rapid and deeper integration led by a smaller group of Member States is preferable to a model of unanimity, which risks slower and more limited progress. It is the creation of a ‘coalition of the willing’. SECMA represents the most effective longterm solution to support the SIU and to overcome the political and legislative impasse in deeper integration into European capital markets. Page 11 of 195 Study on consolidation and reducing fragmentation in trading and post-trading infrastructures in Europe The core elements of SECMA would be: Implement a single harmonised legal and tax regime for securities. Those countries that choose to join SECMA will implement a uniform legal framework covering at least the nature of securities and book-entry systems, transfer of legal title and settlement, as well as common insolvency laws and a single tax regime for

securities. Harmonisation must entail as far-reaching harmonisation as possible of the functional or substantive legal concepts and rules, be technologically neutral, and be implemented via opt-in EU Regulations, not Directives. Opting-in countries will be required to harmonise their own national rules and regulations related to the operation of domestic capital markets. We anticipate that the efficiencies and success of SECMA will create a compelling reason for other countries to opt-in. SECMA does not constitute a 28th regime for the EU capital markets law. We are not convinced that the idea of a “28th regime” (an optional EU-wide legal framework for issuers) offers a shorter path to the desired solution. Where a 28th regime creates an optional, parallel regime, possibly limited to a subset of issuers and implemented by national supervisors with uncertain prospects for convergence, SECMA implements a single, common regime for all issuers across the participating countries,

implemented through centralised supervision, creating immediate convergence. The demonstration effect of early adopters in SECMA may encourage other countries to follow suit. Reform the supervisory structure. The goal is a centralised and streamlined supervisory structure, while recognising the importance of direct contact between local supervisors and local institutions with local knowledge in the local language. This would be achieved by centralising supervisory responsibility in the opting-in countries in a reformed and fully-resourced ESMA, governed by an independent board of experts. The model of market supervision would be reversed, ie, detached from national interests; existing NCAs of participating countries would operate as local offices of ESMA. Encourage a competitive market-led infrastructure based on open access and interoperability. Competing infrastructures bring cost-efficiency and innovation and provide resilience against a single point of failure, but only if users

can choose freely between infrastructures that are interoperable and large enough to achieve significant economies of scale. Creating more integrated EU capital markets constitutes a higher good than Member States’ attachment to their national infrastructures. To achieve this, the programme must include rule changes such as: • Ensure infrastructure consolidation is market-led, without state ownership, and can generate economies of scale. • Ensure open access between the infrastructure layers, meaning that transactions from any institution in one infrastructure layer can flow to any institution in the next layer. • Mandate CCP interoperability, meaning that a market participant can concentrate their activity in any institution in a layer and transact with any other participant using a different institution. Page 12 of 195 Study on consolidation and reducing fragmentation in trading and post-trading infrastructures in Europe A capital market gains strength from a greater

number of investors, issuers, and intermediaries. The EU could use this model to strengthen links with neighbouring markets in the EEA, Switzerland, and the UK. We believe that many of SECMA’s core elements and principles could also greatly benefit the market for digital and crypto-assets, tokenisation, and innovation in the financial instruments sphere, in particular with respect to unification or as far-reaching as possible harmonisation of the functional or substantive legal concepts and rules, centralised supervision, and creating a competitive market-led infrastructure based on open access and interoperability. Many barriers identified with respect to traditional securities, e.g, legal fragmentation and resulting uncertainty, have already been identified in the case of digital and crypto-assets, and tokenisation, showing that the same underlying issues apply to and may hinder innovation. Building a market infrastructure to support SIU Independent from the opt-in model, we have

identified a number of short-term solutions to facilitate progress towards better integrated EU markets, either as interim steps before adopting the opt-in model or as a second-best approach to SECMA: • Give ESMA powers under CSDR to drive harmonisation of market practices, such as corporate action standards. • Continue harmonisation by replacing Directives with Regulations. • Give legal and regulatory recognition to financial market infrastructure groups to simplify rulemaking and approval of intra-group operational integration. • Mandate centralised supervision of significant cross-border financial market infrastructures, starting with CCPs. • Clarify responsibility for recovery and resolution when supervisory responsibility is centralised. • Mandate open access between trading platforms, CCPs, and CSDs, supported by interoperability to give users choice and competition. • Reform governance of T2S, so that responsibility for its commercial management, operation, and

development would rest with a governance structure in which CSDs, users, and participating non-euro central banks are fully represented in a decision-making and not merely advisory role. • Introduce legislative proposals at the EU level that encourage the adoption of CSD integration models already in use, as described in the report. • Make the collection and dissemination of capital market statistics ESMA’s formal responsibility, with the resources to carry it out. • Make changes to develop greater resilience in the event of an outage in a major trading venue. As a final recommendation, we would suggest that further research is needed to identify the impact that DLT and digitalisation will have on capital markets Page 13 of 195 Study on consolidation and reducing fragmentation in trading and post-trading infrastructures in Europe infrastructure in the future. It was clear from a number of the interviews we conducted that capital markets of the future will be an amalgam

of: • The traditional financial model, relying on regulation and market practice, has resulted from decades of financial operations. • The digital model under development in many corners of the market could create a more innovative and efficient capital market, but it lacks the guardrails of the traditional model. Key findings The following are the key points of our analysis that led to these conclusions. Legislation underpinning capital markets is a mixture of EU and national legislation. National legislation: The basic legislation defining the nature of a security, its ownership, method of transfer, and insolvency rules is national and varies between Member States. Legislation relating to taxes and their application to securities markets is also national. EU legislation: In many cases, national legislation is applied alongside or on top of EU legislation. The transposition of EU Directives may differ or be subject to “gold plating.” Even where legislation takes the form of a

Regulation, it may be interpreted or applied differently. The different interpretations hamper infrastructure consolidation efforts. Supervision of local capital markets carried out by National Competent Authorities and fragmented enforcement creates divergence between markets. Although Union legislation governs all capital market infrastructures, NCAs are largely responsible for authorising, supervising, and enforcing rules. ESMA’s role generally promotes supervisory convergence through guidance and peer reviews, though it is more active only in relation to CCPs. As a result, there is divergence between rules and practices across the EU. Corporate consolidation of market infrastructures has not been able to deliver its full benefits. A number of groups have merged market infrastructures across several Member States. However, the market infrastructures within such groups are authorised and supervised as separate legal entities at the national level. Even where a College of

Supervisors is in place, there are separate rule books for each entity and strict requirements for outsourcing or sharing resources between group entities. As a result, commercial efforts to consolidate market infrastructures have not delivered their full benefits. Page 14 of 195 Study on consolidation and reducing fragmentation in trading and post-trading infrastructures in Europe T2S has failed to achieve its intended objective of delivering greater interoperability between CSDs. T2S was intended to simplify settlement between CSDs, intending that greater interoperability would enable investors to be flexible when selecting CSD service providers. It has successfully enabled participants to centralise their euro settlement accounts and harmonised many features of the settlement process. However, changes to T2S are being adopted slowly. T2S has not been adopted outside the euro area and Denmark, as the additional cost is a disincentive, combined with the limited representation

for non-euro central banks. As a result, it has not addressed the underlying fragmentation between CSDs. Vertical ownership of infrastructure groups can be a barrier to competition and consolidation. Where the different infrastructure layers – trading, clearing, settlement, safekeeping – are all under common ownership, there is an incentive to ensure that transactions remain within the group by feeding them from one layer into the next. This results in fragmentation, particularly in clearing and settlement, and reduced choice and competition. Open access provisions and interoperability are means to address this fragmentation, but they are not always available or fully effective. The lack of reliable, consistent, and affordable statistics and data compounds the difficulty of understanding the nature of the problems. This is evident at many levels. At the aggregate level, many statistics on market activity are reported by infrastructures to their NCAs but are either inconsistent or

not publicly available. At the trading level, market participants need timely, detailed data on market prices to make their trading decisions. The cost and complexity of obtaining this data from multiple sources is an overhead, which may deter firms from entering new markets and result in trading being concentrated in a smaller number of large markets. Trading infrastructure complexity results from a policy decision to create choice and competition and has delivered benefits. A variety of trading mechanisms and venues, largely designed to cater to specific asset classes, meet investors’ differing priorities on price, speed of execution, and minimising market impact. Intermediaries generally have technological solutions that help route orders to the most appropriate venue for ‘best execution,’ and there is little appetite to change the market structure. Exchange-traded funds are listed and traded on multiple platforms to meet the needs of retail investors, creating the need for

sophisticated order management solutions. Page 15 of 195 Study on consolidation and reducing fragmentation in trading and post-trading infrastructures in Europe Clearing infrastructure complexity is generally the result of commercial conditions surrounding access to CCPs. CCP clearing plays a key role in reducing risk and supporting the ability to trade across multiple venues by netting transactions and managing risk on net positions. Three clearing models are currently in use: Single exchange/single CCP: • In this model, all trades executed on an exchange are cleared in a single CCP, which does not clear trades for other venues. Interoperable CCP clearing: • In this model, a trading participant can clear all its trading activity across multiple venues in one of the interoperating CCPs, independently of which CCPs its trading counterparties use. The interoperating CCPs manage the risk exposures and settlements between themselves. Preferred CCP clearing: • In this

model, all trades on a given venue are cleared through a single CCP selected by the trading venue unless both parties to a trade have given instructions to use a different CCP that has been granted eligibility by the trading venue. This results in trading the same security on different venues being split between CCPs, losing some of the benefits of netting, and creating liquidity fragmentation. Market participants generally prefer the interoperable model over the alternatives, as it gives them a choice of a CCP while enabling them to concentrate all their trading activity in a single CCP, increasing operational simplicity and risk management efficiency. Settlement infrastructure complexity results from CSDs evolving along national lines and T2S’s failure to become the definitive interoperability layer between national CSDs. CSDs provide the ultimate record of ownership for securities. They have developed in line with the various national legal definitions of security, ownership, and

transfer of title. Each CSD (and the Securities Settlement System operated by the CSD) is established under national law and supervised locally, albeit subject to EU legislation. The result is a variety of structures and market practices that make it difficult to consolidate the activities of several CSDs in a single institution or for an investor to consolidate securities from different jurisdictions into a single CSD. The option for an issuer to choose the CSD where its securities are issued is little used because of the difficulty of complying with the different national legal requirements in both the home and the host Member States. Page 16 of 195 Study on consolidation and reducing fragmentation in trading and post-trading infrastructures in Europe The high number of CSDs imposes additional operating complexity on market participants and reduces the ability of EU markets to adapt quickly to change, such as the introduction of T+1. We estimate that CSDs in the EU (including

T2S costs passed on by CSDs but not including the ICSDs) cost the industry around EUR 1bn annually, roughly double the cost of the two CSDs in the USA (DTCC for Securities, Fedwire for Treasuries). Page 17 of 195 Study on consolidation and reducing fragmentation in trading and post-trading infrastructures in Europe 1. Introduction This study, commissioned by the European Commission’s Directorate-General for Financial Stability, Financial Services and Capital Markets Union (DG FISMA), sets out to identify barriers and potential options for the further consolidation and reduced fragmentation of trading and post-trading infrastructure in the EU, to create deeper pools of liquidity, produce synergies and related cost efficiencies, and to help lower the cost of financing (Contract EC-FISMA/2024/OP/0002, Lot 2). Implemented by Bourse Consult LLP and Civitta, the project contributes to the broader goals of the Savings and Investment Union (SIU), the Retail Investment Strategy for

Europe, and the European Commission’s Competitiveness Compass 1. Scope of the study Financial Market Infrastructures (FMIs) refer to institutional and technical systems that enable the clearing, settlement, recording, and safekeeping of securities and the execution and completion of financial transactions. In the EU context, FMIs include regulated entities such as central counterparties (CCPs), central securities depositories (CSDs), trading venues, and payment systems essential to capital markets’ functioning. The focus of the study is EU securities markets. Adjacent markets, such as derivatives, are discussed only where relevant. Institutions in non-EU countries, Norway, Switzerland, and the UK, are relevant only to the extent that they are also part of EU markets and to the extent that EU entities use infrastructures located in these countries. The study analyses the current landscape of trading venues, CCPs, and CSDs and explores whether and how corporate and functional

consolidation or integration can contribute to further integration of EU capital markets, focusing in particular on legal, tax, operational, and supervisory barriers. The study examines the benefits that integration provides to issuers, investors, and intermediaries. The significance of this study has increased substantially following the European Commission’s Communication on the SIU, which signals an accelerated policy agenda to tackle fragmentation in capital markets. The Commission is now preparing the process for legislative proposals, which began with a consultation on market fragmentation in Q2 2025. This study is expected to support DG FISMA’s policy development by providing options for regulatory, legislative, or market-led actions that could enhance the efficiency of the EU’s financial market infrastructure. More integrated EU financial markets and deeper liquidity pools would also contribute to the broader Commission’s objectives of supporting financing and

investment exits for startups and scale-ups. 1 Letta, E. (2024), Draghi, M (2024), European Commission (2025 a & b) Page 18 of 195 Study on consolidation and reducing fragmentation in trading and post-trading infrastructures in Europe This study offers an analysis of how Europe’s capital market infrastructure has evolved, where it stands today, and where it is headed next. It focuses on the tensions between consolidation and fragmentation in trading and post-trading systems and highlights the main obstacles that continue to stand in the way of more integrated and efficient European capital markets. Finally, however, it must be kept in mind that an efficient market infrastructure is a necessary but not a sufficient condition for an integrated European capital market. Broader success will depend on implementing measures to address fundamental issues, including incentives to allocate savings to risk capital and to use capital markets to finance investment. These, in turn,

will require changes to national pension systems, tax policies, and other areas affecting savings and investment patterns that are outside the scope of this study. These issues have been widely discussed in other reports 2. 1.1 Overview of methodology applied The methodology applied in this study adheres closely to the Terms of Reference and was structured around four core analytical tasks. Each task was carried out using a combination of desk-based research, targeted stakeholder interviews, regulatory and legal mapping, qualitative case studies, and, where applicable, quantitative and comparative analysis. This mixed-methods approach ensured robust evidence development, informed by multiple data sources and a representative sample of market actors. A distinction is made between consolidation (defined as changes in corporate ownership) and integration (operational or technical alignment). This allows the study to address the nuanced ways market infrastructure across trading and

post-trading has evolved in recent years, and to identify where institutional, legal, or economic factors were impeding integration despite formal consolidation. 1.2 Data sources and stakeholder engagement This study draws on a broad and diverse set of inputs: • Publicly available data from financial market infrastructures. • Legislative and regulatory sources from both the EU and Member States. • Data and technical input from supervisory authorities, including ECD and ESMA. At various points in the report, we highlight problems or deficiencies in the publicly available data that need to be addressed. 2 Letta, E. (2024); Draghi, M (2024) Page 19 of 195 Study on consolidation and reducing fragmentation in trading and post-trading infrastructures in Europe We are grateful to BMLL Technology for their support in providing detailed market data for the analysis of trading patterns and to AFME and Value Exchange for giving us advance access to the survey results to be

published later in 2025. To complement this desk research, we conducted 98 targeted, semi-structured interviews with 76 institutions across 21 European countries. The interviewees represented the full capital market ecosystem, including: • Financial Market Infrastructures: European exchange groups, Multilateral Trading Facilities (MTFs), CCPs, and both national and international CSDs. • Market Participants: Pan-European and regional buy-side asset managers, sellside investment banks, and global custodians. • Supervisory and policy bodies: European authorities, including ESMA, the ECB, DG FISMA, as well as several National Competent Authorities and Ministries of Finance. • Industry Associations: A wide range of associations representing all parts of the value chain. The full list of stakeholders consulted is included in Annex 2. The stakeholder engagement was intentionally broad and inclusive, capturing the perspectives of both large pan-European actors and smaller national

market participants, as well as infrastructure providers, public authorities, and trade bodies. In addition, some 20 organisations, particularly issuing companies, either declined or did not respond to an invitation for an interview. We also conducted an online survey aimed at market participants rather than market infrastructures, distributed through industry associations, which captured structured responses to questions on market access, costs, regulatory burdens, and priorities for reform at the EU level. The response rate was disappointing, with only 26 valid responses. They do, nevertheless, represent a broad geographical and institutional spread. Results from the survey are included in the report, where they add a market participant perspective, and the full results are included as Annex 3. In all cases, however, the limited response rate must be considered. Page 20 of 195 Study on consolidation and reducing fragmentation in trading and post-trading infrastructures in Europe

1.3 Validation of the study’s results To ensure methodological soundness and the policy relevance of findings, we employed the following validation process: • • • • Internal quality checks for data consistency and methodological coherence. Stakeholder feedback sessions with leading associations and legal scholars. Continuous consultations with DG FISMA, including regular review meetings. Review by independent experts at Cambridge Econometrics. This process helped refine the recommendations presented in Chapter 9 and provided confidence that the Final Report reflects a thorough and credible understanding of the structural, institutional, and economic factors influencing EU capital market infrastructure. Any faults that remain are the authors’ responsibility Page 21 of 195 Study on consolidation and reducing fragmentation in trading and post-trading infrastructures in Europe 2. History 2.1 Setting the scene: European equity markets in the past 50 years Entering

the last quarter of the 20th century, the structure and ownership of European stock exchanges were little different from when they were founded in the 17th and 18th centuries. They were generally not-for-profit organisations, owned by the brokers who were their members, and served to provide a physical venue and rules for the face-toface trading of securities between the members. Post-trade settlement was largely paper-based. No stock exchange in Europe used a CCP All of this has changed in the past 50 years as a result of five major trends: the changing nature of exchanges, the European Monetary Union (EMU), the growth of electronic trading, the introduction of CCPs, a debate over the comparative merits of vertical and horizontal market structures, and investment by American institutions 3. 2.11 The changing nature of exchanges The first decisive change was the “Big Bang” in London in 1986. Faced with the threat of investigation for restrictive practices and likely fines, the

London Stock Exchange (LSE) agreed to reform its rules to permit banks, including foreign banks, to become stock exchange member firms; to remove the separation between brokers and market makers; and to remove fixed commissions for trading. The result was an immediate inflow of investment from banks taking over member firms and providing greater capital to support trading activity. While exchanges were quasi-mutual organisations owned by their members, they were protected from takeover activity, but changes to the legal form of an exchange opened this possibility. In Sweden, the monopoly enjoyed by the Stockholm Stock Exchange was rescinded in 1993. As a result, the stock exchange changed its legal status to an ordinary for-profit limited liability company and issued shares to its users. This made it possible for OM AB, a Swedish futures exchange, to acquire the Stockholm Stock Exchange in 1998. The next step was for exchanges to become publicly listed companies. OM had already become

the world’s first publicly listed exchange in 1987. In 1992, the Frankfurt Stock Exchange demutualised and changed its name to Deutsche Börse (DBAG), which was floated through an IPO in 2001. 3 The main sources for this section are ECB (2007), Lee (1998), Norman (2007 a & b, 2011 a & b) and Worthington (1991). Page 22 of 195 Study on consolidation and reducing fragmentation in trading and post-trading infrastructures in Europe 2.12 European Monetary Union The prospect of a single currency in Europe focused attention on the need to be able to trade securities freely across the single currency area. At the start of stage three of EMU, eight European stock exchanges started discussing the formation of a more integrated European equity market. These discussions failed, but the Paris, Amsterdam, and Brussels exchanges merged to form Euronext in 2000. The subsequent development of Euronext is shown in Figure 1. Figure 1. Development of the Euronext exchanges group

Source: Consultant analysis. In parallel with these exchange developments, Euroclear (created as a Eurobond depository) started acquiring CSDs in France, the Netherlands, the UK, and Belgium. In 2009, it brought the Belgian, French, and Dutch CSDs onto a common technical platform called Euroclear Settlement of Euronext-zone Securities (ESES), as shown in Figure 2. The Helsinki Stock Exchange (HEX) took controlling stakes in the Tallinn and Riga stock Exchanges in 2001 to move trading onto the HEX platform by the time they joined the euro in 2004 (see Figure 3 further below). During that period, the EC commissioned the Giovannini reports (2001, 2003) on further harmonisation of cross-border clearing and settlement arrangements in the EU. The reports made a series of recommendations, some of which have been implemented in the following years. In 2006, the ECB announced its plan to develop TARGET-2 Securities (T2S), a technical platform integrating the settlement functionality of

eurozone CSDs based on the single eurozone payments infrastructure. Page 23 of 195 Study on consolidation and reducing fragmentation in trading and post-trading infrastructures in Europe Figure 2. Development of the Euroclear group Source: Consultant analysis. 2.13 Electronic trading The development of electronic trading technology has had a major influence on securities markets. By replacing the traditional trading floor, electronic trading has made it possible to access trading from remote locations and generate trading decisions by computer. The LSE introduced an electronic quote-driven trading system for international securities, known as SEAQ-I, in the 1980s. This, combined with the trading capital available following Big Bang and the restrictions that existed in many continental European markets, resulted in significant trading volumes passing to SEAQ-I: in 1990 the value of trading in London amounted to more than 50% of trading on the home market for Swedish and Dutch

shares and between 15% and 25% for French, Swiss and Spanish shares. However, SEAQ-I lost its dominance during the 1990s. The Investment Services Directive, implemented in 1996, introduced the concept of passporting services. Other exchanges modernised their trading technology and overtook the LSE. MiFID I in 2007 accelerated the impact of technology by creating a new category of institution: MTFs. These MTFs applied trading technology to bring multiple instruments and multiple counterparties together on one platform. The first MTF to make an impact was Chi-X (launched in 2007), which by 2010 became one of the largest trading platforms in Europe. Anxious to see faster progress towards delivering a single trading platform for European securities, a group of investment banks worked together to develop and launch a second MTF platform, Turquoise, in 2006. Page 24 of 195 Study on consolidation and reducing fragmentation in trading and post-trading infrastructures in Europe 2.14 The

introduction of CCPs The growth of electronic trading platforms has brought important consequences to market structure. They were generally based on the principle of the anonymous public limit order book. Participants’ willingness to expose their limit orders publicly depended on their being able to do so anonymously, both before and after trading. Electronic trading platforms also made it possible for firms to use computer-based (algorithmic) trading programs. These could be designed to mask trading activity by breaking a large order into smaller ones or to drip them into the market to achieve a specific outcome, such as a volume-weighted average price (VWAP), which required an order to be fed into the market throughout the day. The effect was multiplying the number of trades being processed, as a single client order could result in multiple trades. The combination of the need for pre- and post-trade anonymity with the massive increase in the number of trades required the use of

CCPs. France developed the first CCP for equities in 1990, known as ISB. In 2000, it merged with the Dutch and Belgian clearing houses to create Clearnet, a subsidiary of the newly formed Euronext. European Multilateral Clearing Facility (EMCF) was formed in 2007 to provide clearing for Chi-X and other MTFs and became a CCP for Nasdaq’s Nordic market in 2009. However, the large European banks, which were active in multiple markets, became concerned at the multiplication of CCPs and launched an effort through the European Securities Forum to build a single pan-European CCP. This failed to make progress and was abandoned. Instead, a group of equity market CCPs (LCH Clearnet, SIX x-clear, EMCF, and EuroCCP) responded to the desire to avoid fragmentation by developing an interoperability model to enable market participants to concentrate their clearing in one CCP while trading with participants who used a different CCP. Initially, this raised concern among regulators over the degree of

exposure between CCPs, but the model was approved in 2011. 2.15 Vertical/horizontal market structures As market infrastructures started to consolidate, a debate emerged around the best model for doing so – the so-called “vertical” and “horizontal” models. DBAG in Germany was the leading proponent of the vertical model. The exchange took ownership of the two German securities depositories (DKV and AKV) in 1997 and acquired the international CSD, Cedel, renamed Clearstream, in 2000. It also owned Page 25 of 195 Study on consolidation and reducing fragmentation in trading and post-trading infrastructures in Europe a majority share in the derivatives exchange Eurex and its clearing house. Thus, it provided an integrated “silo” of all the market services in Germany. By contrast, the markets in north-west Europe took a different route. When the exchanges in France, Belgium, and the Netherlands formed Euronext, ownership of the post-trade services was not part of their

strategy. Euronext sold the Belgian CSD to Euroclear, which had already acquired the CSDs in France, the Netherlands, and the UK. Thus, two horizontal groups were formed in parallel – one consolidating trade platforms and one consolidating CSDs. A further move towards horizontal market structures occurred when the OM Exchange in Sweden merged with the Helsinki Stock Exchange (HEX) (Figure 3). Before the merger, HEX owned the Finnish CSD, but as part of the merger, it consolidated it with the Swedish CSD to form the Nordic CSD, which was later acquired by Euroclear (Figure 2). In 2004, DBAG launched a bid for LSE. One of the key contentious issues in the proposal was that the German CCP, Eurex Clearing, owned by DBAG, would become the CCP for the whole group, replacing LCH, which was independent of LSE, in the UK. In the end, the merger was blocked by the UK competition authority on the grounds that it would reduce competition (see Annex 1 for further details). Concerns about the

implications of vertical consolidation of trading and post-trade entities grew and attracted the attention of the European Commission (under Commissioners McCreevy and Kroes in DG MARKT and DG COMP, respectively). In 2004, the European Commission found against Clearstream on the grounds that it had abused its dominant position by refusing to provide clearing and settlement services to Euroclear Bank and by applying discriminatory pricing. In 2006, DG COMP published an Issues Paper, “Competition in EU securities trading and post-trading” 4. Its conclusions included statements that competition in trading services is possible and desirable, access to clearing is a prerequisite for competition to be effective, and vertical integration may result in foreclosure at all levels of the value chain. This resulted in a set of policies to ensure open access and enforcement when this was blocked. Subsequent proposals for mergers involving DBAG, with Euronext in 2011 and with LSE in 2017, failed

on concerns over the implications for competition. 2.16 American investment in European infrastructure In the US, the consolidation of securities market post-trade infrastructure was complete by 1997 (see case study below), putting US institutions in a position to invest in Europe. 4 European Commission (2006). Page 26 of 195 Study on consolidation and reducing fragmentation in trading and post-trading infrastructures in Europe In 2000, Nasdaq proposed establishing a pan-European exchange with DTCC, the US operator of CCPs and a CSD, establishing EuroCCP to provide clearing. Nasdaq’s plan was cancelled, however, and EuroCCP was put on ice, later to be revived as the CCP for Turquoise. In 2007, Euronext merged with the New York Stock Exchange (NYSE) to form NYSE Euronext, creating a powerful transatlantic group. However, in 2013, Intercontinental Exchange (ICE) took over NYSE Euronext and spun off Euronext through an IPO, so it returned to being a purely European exchange.

Figure 3. Development of the Nasdaq Nordic and Baltic group Source: Consultant analysis. In 2008, BATS (a US trading technology company), which already operated exchanges in the US, launched a trading platform in Europe, emphasising highperformance technology, and acquired Chi-X in 2011. In 2017, Cboe, a US exchange operating company, acquired BATS in the US and created Cboe Europe. In 2020, Cboe acquired EuroCCP. 2.2 Current landscape At the end of these 50 years of activity, there is no common pattern to European equity market infrastructure (see Figure 4). There is a clear difference between northern and western Europe, with a number of cross-border groups and operations, and eastern and southern Europe, where market infrastructures operate almost entirely nationally. The 2004 initiative to bring together exchanges in Vienna, Budapest, Prague, and Ljubljana in the CEESEG group dissolved in 2015, leaving only the Vienna and Prague exchanges linked. Structures range from a purely

horizontal multi-market model (for example, Nasdaq Nordic) to a strictly vertical single-country model (for example, DBAG and several Page 27 of 195 Study on consolidation and reducing fragmentation in trading and post-trading infrastructures in Europe eastern and southern European markets). Euronext combines elements of vertical and horizontal structures. In Figure 4, horizontal markets are shown with horizontal shading, and vertically integrated markets are shown with vertical shading. Colours indicate entities within the same corporate group. Figure 4. Ownership of exchanges and CSDs in Europe (end-2024) Source: Consultant analysis. Case study: Consolidation of capital market infrastructure in the USA Capital markets in the USA first developed at the state and local level. In the early 20th century, there were at least 25 stock exchanges from New York City to Spokane. States began to regulate securities activity in 1911 with the so-called “blue-sky” laws. However,

following the Wall Street crash in 1929, as part of the New Deal legislation, the 1933 Securities Act and the 1934 Securities Exchange Act (which created the Securities and Exchange Commission, SEC), put in place a national focus, while preserving the jurisdiction of state securities commissioners. Federal-state co-ordination continued, with the balance shifting to the SEC, until the 1956 Uniform Securities Act enabled most large corporate issuers to use their federal filings to satisfy state requirements 5. 5 The main sources for this section are Gordon & Judge (2018) and Rodengen (2023). Page 28 of 195 Study on consolidation and reducing fragmentation in trading and post-trading infrastructures in Europe Physical share certificates had to be exchanged for each trade. In the late 1960s, a paperwork crisis developed, so serious that exchanges closed every Wednesday to help reduce the backlog. In response, in 1968, the New York Stock Exchange (NYSE) established the Central

Certificate Service to immobilise share certificates, which developed into the Depository Trust Company (DTC). However, each state needed to revise its securities laws to allow banks to participate in a national depository. Other exchanges followed this example, and by 1975, seven exchanges owned their own clearing and settlement arrangements. They resisted consolidation, as CCPs contributed a significant share of the income of the exchanges. The relationship between these exchanges and DTC was cooperative, enabling deliveries between depositories, and competitive. In 1975, the Securities Act Amendments were passed, requiring the SEC to promote a unified national market in trading, clearing, and settlement. The NYSE started selling shares in DTC to other exchanges and users. For the first time, CCPs and CSDs were required to apply to the SEC for registration. The national system was to be built on regulated free interfaces between the regional systems. Subsequently, in 1976, the

National Securities Clearing Corporation (NSCC) was formed from the merger of the CCPs owned by NYSE, American Stock Exchange, and NASD. The three exchanges continued to receive a fee per trade for several years to compensate them for the loss of income. All CSDs were interlinked to form a national system. The CSDs and CCPs owned by the regional stock exchanges gradually merged into DTC and NSCC, respectively, between 1976 and 1997. DTCC was formed as the user-owned holding company for DTC and NSCC in 1999. In 2005, the rules establishing the national market system were consolidated in the SEC Regulation National Market System (REG NMS), which included the Order Protection Rule, intended to reduce price fragmentation between exchanges, but also was blamed for some unintended consequences. The number of stock exchanges has also declined as regional exchanges have either been merged or closed. There are now 10 national securities exchange groups in the US (some including several

registered exchanges). The infrastructure for government securities developed separately. The Federal Reserve System has operated a wire transfer system for payments since 1915. As the US government’s fiscal agent, the Fed started to transfer short-term Treasury instruments in 1921 and long-dated bonds in 1948. The system gradually eliminated paper certificates from the 1960s and moved to an entirely electronic, book-entry system, known as Fedwire, in 1986. Page 29 of 195 Study on consolidation and reducing fragmentation in trading and post-trading infrastructures in Europe 3. Issues in market structure The following chapters describe the infrastructure layers that comprise the capital market value chain – listing, trading, clearing, settlement, and safekeeping. They must work effectively to form the capital market ‘system’. The overall effectiveness of this is evaluated against three criteria: • Is it efficient? Does it link together the different layers to make it

simple and costeffective to carry out transactions? Are entities large enough to achieve economies of scale, and where are these available? • Does it support competition? Do market users have the ability to choose between alternative providers based on price, quality, innovation, or other qualities? • Does it promote financial stability? Does it distribute activities in a way that minimises the overall risk of systemic failure? These requirements contradict each other to some degree in relation to market infrastructures. A single pan-European provider may be efficient but does not support competition or distribute risk. A very fragmented system may be highly competitive but inefficient; it may distribute risk among entities too small to bear it. And so on Market structure is also evaluated along two dimensions: • Horizontal: the relationships between entities providing services in the same layer of the value chain. • Vertical: the relationships between entities providing

different services along the value chain from listing and trading to settlement. The evaluation of market structure against the efficiency, competition, and financial stability requirements may differ across the two dimensions. The evolution of Europe’s capital market infrastructure over the past twenty years can be seen by comparing Figure 5 and Figure 6, which map the infrastructure in 2005 and 2025, respectively. Each infrastructure group is represented by a colour Comparing the two maps, it can be seen that in 2025, there are more horizontal groups providing services across multiple markets and an additional vertical group (Euronext) providing services in all the layers. Page 30 of 195 Study on consolidation and reducing fragmentation in trading and post-trading infrastructures in Europe Figure 5. European securities market infrastructure in 2005 UK IE FR NL BE PT IT NO DK SE FI LV LT EE DE LU CH ES AT CZ HU PL HR SI SK RO BG GR CY MT ro ne

xt BI OB O M X G r p DB Lux SIX BME WB PSE BSE GP ZSE LSE BSE BSE BSE Ath CSE MSE BI OB DB Lux SIX BME WB PSE BSE GP ZSE LSE BSE BSE BSE Ath CSE MSE CBL SIX IbC ÖKB CDC KLR KDP SKD KDD CSD DC CDA Ath CDC MSE Listing LSE Eu Trading: national LSE Euronext * Trading: cross-border* Virt-x Clearing CCG Eux LCH SIX Clear Settlement: CSD Euroclear Euronext MT VPS VP NC SD Nasdaq CSD Organisations shaded in the same colour belong to the same corporate group (except for grey) * Also, other smaller MTFs: Equiduct, etc. * Regional German exchanges in Berlin, Stuttgart, Interoperable CCPs Source: Consultant analysis based on London Economics (2005a & b). Page 31 of 195 CBF Study on consolidation and reducing fragmentation in trading and post-trading infrastructures in Europe Figure 6. European securities market infrastructure in 2025 UK FR BE NL IE PT IT NO DK SE FI LV LT EE DE LU CH ES

AT CZ HU PL HR SI SK RO BG GR CY MT Listing LSE E u r o n e xt N a s d a q DB Lux SIX BME WB PSE BSE GP ZSE LSE BSE BSE BSE Ath CSE MSE Trading: national LSE DB Lux SIX BME WB PSE BSE GP ZSE LSE BSE BSE BSE Ath CSE MSE Trading: cross-border* Cboe KLC KDC SKC KLR KDP SKD CDC MSE Euronext Nasdaq Nordic Baltic SP * Turquoise Aquis Clearing Euronext Clearing Eux EnC CBF CBL CP.A Ath Cboe Clear LCH SIX Clear Settlement: CSD Euroclear Eu ro ne xt Nasdaq CSD T2S SIX € Organisations shaded in the same colour belong to the same corporate group (except for grey) * Also, other MTFs: Equiduct, etc. * Regional German exchanges in Berlin, Stuttgart, Interoperable CCPs Source: Consultant analysis. Page 32 of 195 IbC ÖKB CDC KDD CSD DC CDA Ath Study on consolidation and reducing fragmentation in trading and post-trading infrastructures in Europe Conceptual framework for analysing market

infrastructure integration The conceptual framework is based on the economic characteristics of financial market infrastructures: • • • • Economies of scale. Network effects. Switching costs. Differentiating factors. All market infrastructures benefit from economies of scale, based on the high fixed cost of technical infrastructure and regulatory compliance, and the very low variable cost of each trade or transaction. All market infrastructures benefit from network effects, as the benefit to users grows with the number of users. These network effects may exist within the same type of users (e.g, the more firms trading on an exchange, the greater the liquidity and therefore the greater the attractiveness of the exchange). Network effects can also exist between different types of users (e.g, the greater the liquidity on an exchange, the more attractive it becomes to issuers as a listing venue). However, for investors, switching costs vary between types of infrastructure: for

trading venues switching costs are low (doing a trade on platform A does not significantly increase the cost of doing the next trade on platform B) but for CCPs and CSDs switching costs are significant (for example, if one trade is cleared in CCP A then reversing that trade in CCP A reduces margin requirements while reversing that trade in CCP B increases overall margin requirements). For issuers, moving a (primary) listing typically involves higher costs because listings are usually issued into the CSD linked to the chosen venue, and a change or duplication may require either changing the issuer CSD or using links from the new venue’s CSD to the original issuer CSD (secondary listings can often rely on links). Differentiating factors also vary between types of infrastructure: exchanges constantly compete by innovating with new order types and instruments, together with fee structures, but there has been less scope for CCPs and CSDs to innovate. The interplay between these factors

helps to explain the different dynamics in different market sectors. Although trading venues benefit from economies of scale and network effects, these are offset by differentiating factors and low switching costs, allowing multiple competing trading venues to coexist in the same market. For post-trade infrastructure, however, the absence of differentiating factors and the high switching costs result in CCPs and CSDs tending to become natural monopolies. Page 33 of 195 Study on consolidation and reducing fragmentation in trading and post-trading infrastructures in Europe Horizontal evaluation A fragmented rather than consolidated structure is preferred for trading. Technological economies of scale are not significant, given that the technology is widely available. Switching costs are low However, the opportunities for competition to reduce costs and stimulate innovation are high. The impact on financial stability is not significant. For clearing, there is more benefit from

consolidation. Netting efficiency (the process of consolidating obligations to achieve cost savings and operational effectiveness and reduce the number of transactions for settlement) for users rises as the number of trading venues that can be cleared by one CCP increases. There are benefits from consolidating default funds and margins. However, there are competition benefits from having more than one CCP in a market. To the extent that CCPs are substitutable (i.e, clear the same assets), there are financial stability benefits from having more than one provider in each market. This points to the optimal structure being a small number of competing CCPs with the costs of fragmentation offset by interoperability arrangements. The evaluation for safekeeping and settlement is similar to that for clearing. For users, the costs of repositioning cash and securities between CSDs point to the benefit of consolidating each security in a single CSD. There are significant economies of scale for

providers, again pointing to the benefits of consolidating in a small number of entities. Effective linkages that enable users to consolidate holdings in the CSD of their choice while settling with users in other CSDs will support competition and diversify risk. This solution does not exist at present except for international bonds and some government bonds. Vertical evaluation The need for transactions to flow through the different layers of the system means that access to one layer has implications for access to other layers. For example, if a trading venue mandates the use of a given CCP to be able to use the trading venue, then the ability to access the CCP determines access to the trading venue. Over the past twenty years, these issues have attracted increasing attention in decisions on proposed mergers in capital market infrastructure. (Notes on the key cases are included in Annex 1) The 2004 Clearstream decision 6 established that a national CSD providing primary settlement in

effect had a natural monopoly and must not abuse that position. Consequently, national CSDs have accepted that they must be open to participation by all potential participants, including other CSDs. 6 European Commission (2004). Page 34 of 195 Study on consolidation and reducing fragmentation in trading and post-trading infrastructures in Europe The central role of CCP clearing was first addressed in the 2005 UK decision on a potential merger between LSEG and either DBAG or Euronext 7. This identified that access to clearing was essential to enable competition between trading platforms and made approval of the merger’s conditional on access arrangements. (Neither merger proceeded) This approach was maintained in the open-access provisions put in place and approved in 2013, when LSEG took control of LCH 8. The principle of ensuring open access to clearing has been maintained: LCH Ltd provides clearing for multiple trading platforms, including ones competing directly with LSEG

venues. The same principle of open access has been adopted by Cboe Clear and SIX x-clear and is the basis of the interoperable clearing model. The 2017 DG COMP decision on the potential merger of LSEG and DBAG added to the analysis of the role of CCP clearing by analysing the potential for a CCP to direct settlement flows to a group-owned CSD rather than an independent one 9. The 2021 DG COMP review of the divestment of Borsa Italiana to Euronext did not analyse the potential relationship between clearing and settlement 10. Following the acquisition of Borsa Italiana, Euronext is currently mandating that settlement of transactions from the group CCP should occur in the group CSD, rather than external CSDs. Market participant views on SIU How far have the following factors posed barriers to your firm achieving its business objectives in relation to the SIU? Number of respondents 11. Source: Consultants’ survey of market participants. Full results in Annex 3 7 Competition Commission

(2005). 8 Office of Fair Trading (2013). 9 European Commission (2017). 10 European Commission (2021). 11 “No opinion” or “Don’t know” responses not shown. Page 35 of 195 Study on consolidation and reducing fragmentation in trading and post-trading infrastructures in Europe 4. Bringing Securities to Market The capital markets that are the subject of this study are made up of securities 12 that are generally available for investment and trading by the public and by professional investors. These consist of: • Equities (representing a share in the ownership of a company). • Bonds or fixed income securities (representing an obligation by an entity to make future payments). • Certain investment vehicles, including ETFs and closed-end investment companies. (Open-ended investment companies, OEICS, are not included as they are not traded but are sold directly to the end-investor.) Table 1. Mapping of EU Legislation in the area of listing in the EU Capital Markets Law.

Legal Instrument Area of Regulation Objective / Scope Remarks / Status Prospectus Regulation (EU) 2017/1129 Disclosure rules for securities offerings and admissions to trading. Protect investors and ensure comparability. Amended by the Listing Act. Listing Act Regulation (EU) 2024/2809 and Directive (EU) 2024/2811 Amend MiFIR, MAR, Prospectus Reg. to ease listing burdens. Increase EU market attractiveness and reduce regulatory burden. Final texts published, apply from early 2025. Prevent market abuse (insider dealing, market manipulation). Ensure market integrity and investor confidence. Minor adjustments in the Listing Act, further review ongoing. Harmonised rules for the creation, management, and cross-border distribution of UCITS. Facilitate a single EU market for retail investment funds, ensuring investor protection, product standardisation, and passporting rights. Amended by Directive UCITS V (2014/91/EU). Subject to review of UCITS and AIFM Directives.

Regulation of managers of alternative investment funds (AIFMs), including hedge funds, private equity, real estate funds, and other non-UCITS funds. Establish a harmonised regulatory framework for AIFMs across the EU. In force since 2011 and subject to review, with amendments proposed in AIFMD II (Directive 2024/927) in 2024s. Central access point for financial and sustainability-related data. Facilitate investor access to data, increase transparency. Entry into application: phased, starting in 2026. MAR Market Abuse Regulation (EU) No 596/2014 UCITS Directive Directive 2009/65/EC (UCITS IV) AIFMD Directive 2011/61/EU ESAP Regulation European Single Access Point Regulation (EU) 2023/2859. 12 The EU capital market legislation refers to “transferable securities” which themselves constitute a group belonging to the wider category of financial instruments as defined in MiFID II. Page 36 of 195 Study on consolidation and reducing fragmentation in trading and post-trading

infrastructures in Europe Legal Instrument Area of Regulation Objective / Scope Remarks / Status Transparency Directive 2004/109/EC (as amended) Periodic and ongoing transparency obligations for listed issuers. Harmonise disclosure requirements for issuers listed in the EU. Applies to issuers whose securities are admitted to trading on regulated markets. Accounting Directive 2013/34/EU Annual and consolidated financial statements of companies. Ensure consistency and comparability of financial reports. Relevant for financial reporting obligations of listed entities. Audit Regulation (EU) No 537/2014 and Directive 2014/56/EU Audit of public-interest entities, including listed companies. Ensure audit quality and independence in public capital markets. Part of the EU audit reform package applicable to listed issuers. Source: Consultant analysis. Generally, in order for a security to be offered to the public or to be admitted to trading on a regulated market, there must be

an initial prospectus approved and published. This requirement does not apply to certain types of securities, such as non-equity securities issued by Member States or their regional or local authorities, by public international bodies of which one or more Member States are members, by the European Central Bank or by the central banks of the Member States. There are also several exemptions from the obligation to publish a prospectus, for example, for public offers targeted only at professional investors and for small public offers under EUR 8 mn 13. Moreover, the Listing Act initiative has recently amended the Prospectus Regulation by introducing new exemptions from the obligation to publish a prospectus for public offers or admissions to trading on a regulated market of securities fungible 14 with securities already admitted to trading. The prospectus aims to provide initial potential investors with the information they need to assess an investment when securities are offered to the

public or admitted to trading on a regulated market, such as in the case of an Initial Public Offering (IPO). Minimum disclosure requirements and continuing disclosure obligations are prescribed in legislation 15. A prospectus must be approved by the relevant National Competent Authority (NCA) before securities can be offered to the public or admitted to trading on a regulated market. Responsibility for approval rests with the competent authority designated by each Member State under the Prospectus Regulation. This function cannot be delegated to other entities. Once a prospectus has been approved, the securities may be offered to 13 As of 5 June 2026, as part of the Listing Act initiative, the threshold of EUR 8 mn will increase to EUR 12 Mn. However, Member States are allowed to set up a EUR 5 mn threshold instead, subject to notification to the Commission and ESMA. Notification is also required if Member States that initially chose the EUR 5 mn threshold subsequently decide to

revert to the EUR 12 million threshold. 14 Such as shares of the same class. 15 For example, minimum disclosure requirements for the prospectus are prescribed in the Prospectus Regulation, while ongoing disclosure obligations are governed by other instruments such as the Market Abuse Regulation and the Transparency Directive. Page 37 of 195 Study on consolidation and reducing fragmentation in trading and post-trading infrastructures in Europe the public or admitted to trading on a regulated market in any Member State, subject to a notification procedure involving the host competent authority and ESMA, where the host differs from the home authority. Table 2. Number and value of financial instruments outstanding in the EU by type Number of issues (end-2022) Value outstanding (bn EUR, end-2024) Listed equities SME Growth Market equities 6 210 10 613 Closed-end investment companies EU public sector bonds 3 988 Listed private sector bonds 41 812 ETFs 3 626 25 130 Not

available Source: Number of issues from ESMA Statistics on Securities and Markets 2024. Value outstanding from SIFMA 2025 Capital Markets Fact Book. Statistical Note: this data partly draws on an ESMA report, which was last published in May 2024 and contains data relating to 2022. 4.1 Equities The requirements for listing equities are generally more prescriptive than for fixed income instruments. Equity prospectuses must be approved in the Member State where the issuer has its registered office. In 2023, 431 equity prospectuses were approved in the EU Most equities, other than SMEs, are admitted to trading on a regulated market. The consequences of listing are: • The issuer must comply with the requirements of the exchange, which may be greater than the minimum legal requirements (as well as additional legal requirements that apply to listed companies). • The exchange may guide issuers in preparing for listing and publishing market data, such as prices and trading volumes, for

listed equities. • Listed equities are admitted to trading on the exchange’s trading platform. • The issuer pays listing and annual fees to the exchange in connection with the admission and maintenance of the listing. • Listed companies are subject to additional legal requirements (for some examples, see Table 9). Page 38 of 195 Study on consolidation and reducing fragmentation in trading and post-trading infrastructures in Europe Some issuers obtain a secondary listing on another exchange to broaden their investor base. Within the EU, this does not require approval of a new prospectus but does entail payment of listing fees to the other exchange 16. The market capitalisation and number of listed companies on European exchanges are shown in Figures 7 and 8. Figure 7. Domestic market capitalisation of European stock exchanges, bn EUR, 2024. Source: World Federation of Exchanges (2024). Figure 8. Number of listed companies on European stock exchanges, 2024 Source: World

Federation of Exchanges (2024). Unlike for regulated markets, the admission to trading of securities (equities but also debt) on an MTF – including on an SME growth market – does not require the publication of a prospectus, unless the admission is accompanied by an offer of securities to the public. Therefore, when any of the exemptions for public offers apply, an MTF can allow securities (debt and equity) to be admitted to trading 16 This is distinct from dual listing, which arises when separate legal entities in the same group obtain listings on different exchanges. Page 39 of 195 Study on consolidation and reducing fragmentation in trading and post-trading infrastructures in Europe based on a simpler information memorandum approved by the MTF. Where the listing on an MTF, including an SME growth market, is accompanied by a public offer, it is allowed, in most cases, to draw up a more streamlined EU Growth prospectus 17. 155 EU Growth prospectuses were approved in 2023, the

majority for equities and over half in Sweden. A company can choose to list its equity on a regulated market other than in the Member State where it is incorporated to appeal to a wider group of investors and achieve more liquidity and a better valuation. In 2023, 773 prospectuses were passported to another Member State (most of these were probably for bonds). However, there are several barriers to doing this. The process of having a prospectus approved in the issuer’s home country and approved by the authority in the host country can be time-consuming and incur the cost of preparing additional documentation. To simplify this process, Euronext has launched a European Common Prospectus, a standardised template to be used across the seven Euronext listing venues. In most cases, listing equity on a regulated market is operationally tied and thus typically conducted through the issuing of the securities into the CSD linked with that market. Under CSDR (see Chapter 7), issuers have the

right to issue securities into a CSD of their choice. 18 However, there are still a number of limitations to the freedom of issuance of securities into any EU CSD. Company law and securities issuance laws, which define the legal form of the security, how title is transferred, and issuer–investor relationships, remain national. Company law also rules on whether a share register is required and how it is created and governed, when and how legal title passes, voting mechanisms, and which entity performs the notary functions, which were left untouched by CSDR. The company law of the issuer’s home Member State may be incompatible with the requirements of another CSD – e.g, Finnish companies in practice can only issue in Finland because of individual account requirements. Euronext NV moved the issuer-CSD of its own shares to Euronext Securities Milan. As a result, the freedom for issuers to use a CSD of their choice is little used in practice. Issuers prefer their “home” CSD, where

the legal framework is aligned. Foreign CSDs may lack legal certainty when applying unfamiliar national rules. As a prominent example, however, Euronext NV moved the issuer-CSD of its own shares to Euronext Securities Milan. Moreover, CSDs are not required to accept all types of issuances. Issuers may be legally entitled to access any CSD, but CSDs can refuse on operational or risk 17 As of 5 June 2025, as part of the amendments introduced by the Listing Act initiative, the EU Growth prospectus will be replaced by the EU Growth issuance prospectus, which will be considerably shorter and easier to draw up. 18 Pursuant to Art. 49 CSDR, an issuer has the right to arrange for its securities admitted to trading on regulated markets or MTFs or traded on trading venues to be recorded in any CSD established in any Member State. However, the corporate or similar law of the Member State under which the securities are constituted still continue to apply. Page 40 of 195 Study on consolidation

and reducing fragmentation in trading and post-trading infrastructures in Europe grounds. This is felt to be a particular problem for issuers in Eastern Europe Cross-border issuance also complicates withholding tax relief and fiscal transparency. To sum up, legal, operational, and tax-related barriers still significantly limit the use of the freedom of issuance. “Company law” versus “Securities law” versus “Capital markets law” “Company law”, “securities law” and “capital markets law” often intersect, particularly when a company seeks to raise capital or becomes publicly listed, but their core purposes and regulatory tools are distinct. Company law governs the formation, structure, governance, and dissolution of companies. It sets the legal framework for a company’s internal affairs, including the roles and responsibilities of directors, the rights of shareholders, corporate governance mechanisms, mergers, and capital maintenance. Company law applies to both

private and public companies and is typically rooted in national commercial or civil codes, with some harmonisation in the EU through directives. Securities law in the continental European civil law tradition is primarily concerned with the legal nature and treatment of securities as objects of private law. It defines what constitutes a “security” under national law, determines the legal status of the holder, and governs the creation, transfer, and extinction of rights embodied in the security. Securities law also addresses questions of ownership, custody, and the validity of transactions involving securities, including the protection of good-faith acquirers. Unlike capital markets law, which is predominantly regulatory and public law-oriented, securities law belongs largely to private law and is typically embedded in civil codes, commercial codes, or specialised national acts. At the EU level, there is only very limited harmonisation in this area, so the definitions, categories,

and property law treatment of securities remain largely a matter of national law. Capital markets law regulates the issuance, offering, trading, and disclosure of securities in public markets. Its primary objectives are to protect investors, ensure transparency, and maintain market integrity. It regulates public offerings (like IPOs), continuous disclosure by listed companies, insider trading, and the conduct of financial intermediaries. Securities law mainly concerns companies whose shares are traded on public markets and is often found in specialised statutes and EU regulations such as the Prospectus Regulation, MAR, and MiFID II. In this context, the European “capital markets law” corresponds to an area of legislation referred to in the United States as “securities regulation” or “securities law”, which may lead to confusion. An alternative to issuing securities into a foreign CSD is for the foreign CSD to open a link to the issuer’s CSD, to make it easier for

investors in that country to hold the issuer’s securities. However, a particular frustration among issuers in smaller countries is that the decision to open a link rests with the investor CSD. Thus, the CSD in a small country may want the CSD in a larger country to open Page 41 of 195 Study on consolidation and reducing fragmentation in trading and post-trading infrastructures in Europe a link to make its market more accessible, but there is no obligation to do so if the larger CSD concludes there is no business case for doing so. For example, limited connectivity from Euroclear restricts investor access to Baltic securities, causing friction during IPOs. Clearstream offers partial access, but pan-European post-trade integration remains incomplete. Figure 9. Country of issuer by country of prospectus approval, 2024 Source: ESMA EU Securities Prospectuses (2024). 4.2 Fixed income securities The arrangements for approving prospectuses for fixed-income instruments (where they

are required) differ from equities. For government bonds, there is no prospectus requirement and consequently no listing. For other bonds, there is freedom of choice in listing venue, as there is no requirement for bond prospectuses to be approved in the home Member State of the issuer. As a result, some centres, particularly Dublin, Luxembourg, and Vienna, have developed a speciality in approving and listing bonds. By comparison, however, slow and inconsistent prospectus approval procedures are a handicap for many Eastern European markets. 4.3 Listed investment vehicles Listed investment vehicles consist of: • Closed-end investment companies, which are essentially treated as other listed companies. • Exchange-Traded Funds (ETF). Arrangements for listing and trading ETFs are discussed in Chapter 5.3 below Page 42 of 195 Study on consolidation and reducing fragmentation in trading and post-trading infrastructures in Europe 4.4 Listing: conclusions Issuance of fixed-income

securities faces relatively few problems. Issuance and listing of equities outside the issuer’s home country face considerably more obstacles due to variations in national laws, the requirement for prospectus approval in both home and host countries, and, frequently, the difficulty of issuing into a CSD in the host country. Nevertheless, giving issuers a real choice of the market and CSD where they issue would be an important step in addressing fragmentation. Adoption of a standard European prospectus will help, but the biggest problems for equities and ETFs arise from diverse legislation and fragmentation among CSDs. These issues recur throughout this report Page 43 of 195 Study on consolidation and reducing fragmentation in trading and post-trading infrastructures in Europe 5. Trading Trading enables holders of securities to sell them to buyers who wish to hold them. Important factors for the quality of the trading process are liquidity (the ability to buy or sell quickly

at the current best price) and transparency (disclosure of the prices at which trades are taking place). There can be a conflict between these requirements, especially for large trades, as the need for transparency can undermine the ability to obtain liquidity. Much of the discussion around trading models concerns the balance between these two objectives. The two main models for trading systems are order-driven and price-driven: • In the order-driven model, a matching engine matches buy and sell orders in a very specific order, first by price and then by time, creating a unique queue of buys and sells in a continuous trading environment. Its advantage is its total pre- and post-trade transparency, as firm bid and offer prices are published, as are the trades that are completed. However, the main disadvantage is that, because of the transparency, this model does not attract high-value trades. • In the price-driven model, market makers, sometimes called liquidity providers,

continuously provide firm prices on the bid and offer side. The market maker can be “hit” (i.e, have its price accepted) on any side or both sides simultaneously. The main advantage of this model is the creation of a pool of liquidity. It can be totally transparent on the pre-trade, as in the case of the trading of government bonds in Europe, or it can have different levels of transparency depending on the exchange or platform and on regulatory obligations. Table 3. Mapping of EU Legislation in the Area of Trading in the EU Capital Markets Law. Legal Instrument Area of Regulation Objective / Scope Remarks / Status MiFID II Markets in Financial Instruments Directive (EU) 2014/65/EU Organisation of trading venues (regulated markets, MTFs, OTFs); trading obligations; transparency Enhance market transparency, improve investor protection, and regulate trading infrastructure Reviewed as part of the Capital Markets Union; under revision via the Listing Act MiFIR Markets in

Financial Instruments Regulation (EU) No 600/2014 Pre- and post-trade transparency; trading obligation for shares and derivatives; consolidated tape Ensure transparent and integrated trading across the EU; facilitate competition and data access Substantially amended by Regulation (EU) 2024/791 Short Selling Regulation (EU) No 236/2012 Transparency of net short positions; restrictions during crises Reduce market abuse and volatility In force Page 44 of 195 Study on consolidation and reducing fragmentation in trading and post-trading infrastructures in Europe Legal Instrument MAR Market Abuse Regulation (EU) No 596/2014 SFTR Regulation Securities Financing Transactions Regulation (EU) 2015/2365 Digital Finance Package incl. MiCAR Regulation (EU) 2023/1114 DLT Pilot Regime Regulation (EU) 2022/858 Area of Regulation Objective / Scope Remarks / Status Prevent market abuse (insider dealing, market manipulation) Ensure market integrity and investor confidence Amended by

the Listing Act Transparency of securities financing transactions Improve risk monitoring and market transparency In force; complements EMIR and MiFID Framework for cryptoasset trading and use of DLT Enable innovation while protecting investors In force or under phased implementation Source: Consultant analysis. Trading is governed mainly by EU legislation, which has been constantly updated. Where it takes the form of a Directive, this needs to be transposed by Member States, which not infrequently leads to differences in implementation, application, and enforcement of the rules. Moreover, to each significant Level 1 act from the EU capital markets law, dozens of Level 2 delegated acts and Level 3 acts, like guidelines, opinions, etc., are intended to ensure consistent implementation Gold-plating, i.e, imposing additional burdens whilst implementing EU regulations into national laws of EU Member States (a widespread phenomenon occurring in all Member States), defies the goal of

harmonisation of the EU capital markets laws. Historically, equity trading was concentrated on national exchanges. The objective of MiFID I in 2004 was to enhance competition between trading venues by introducing three categories for trading: • Regulated markets (RMs) are venues that bring together third-party buyers and sellers (on a non-discriminatory basis) in financial instruments that have been admitted to trading under the rules of the trading venue. These trading venues are generally the traditional national stock exchanges. • MTFs are similar to RMs, except these venues initially operated under a lighter set of rules and are not generally used for listing financial instruments (except ‘SME growth markets’). • Systematic Internalisers (SIs) – investment firms that regularly deal on their own account by executing client orders outside an RM or MTF. They are generally large banks and brokers that trade on a bilateral basis by executing orders directly against their own

books. Page 45 of 195 Study on consolidation and reducing fragmentation in trading and post-trading infrastructures in Europe There are 46 RMs for securities in the EU, generally one in each country. However, there are six each in Spain and Germany, where regional stock exchanges still exist. There are 63 MTFs for securities in the EU and 152 SIs 19. 5.1 Equities trading Following the Global Financial Crisis, MiFID II and MiFIR were introduced to address observed shortcomings in the system. The changes included: A requirement for shares to be traded on RMs, MTFs, or SIs. While this effectively prohibited trading via Broker Crossing Networks on an OTC basis, investment firms have looked to SIs to accommodate such trading activity. A cap on equity trading in dark pools (described below) – the double volume cap mechanism (DVCM). The DVCM was designed to limit trading in equity instruments on dark pools by restricting trades executed via the MiFIR waiver system. Under the MiFIR

review, the DVCM is replaced by a Single Volume Cap (SVC) set at 7% of total trading volume in the EU. The SVC applies to transactions that are executed in systems where the price is determined by reference to a price generated by another system, referred to as the reference price waiver. A tick size regime. MiFID II requires all trading venues to price stocks in the same increments. Consequently, several different types of trading venues exist for equities, offering various trading mechanisms to meet the requirements of different investors. These venues can be distinguished according to whether they contribute to price formation. 5.11 Contributing to price formation The Order-Driven Model A Central Limit Order Book (CLOB) displays offers to buy shares (bid) and to sell shares (ask) anonymously, ranked by price. As the bids and offers are visible, this mode is known as lit trading and is provided by RMs and many MTFs. 19 There is no simple source for the number of securities RMs,

MTFs or Sis in the EU. The ESMA Register lists 129 authorisations for RMs (including markets for derivatives and commodities as well as securities), 158 authorisations for MTFs and 172 SIs. In many cases, one legal entity has multiple authorisations. We arrived at our total by counting the number of legal entities with authorisations for securities, as identified by their LEIs. By contrast, the equivalent information for the US is readily available from the SEC. Page 46 of 195 Study on consolidation and reducing fragmentation in trading and post-trading infrastructures in Europe The lit model's advantage is its total transparency on the pre-trade, but this transparency is a deterrent for investors needing to transact in large volumes, as they do not wish to disclose their trading positions. As a result, this model does not attract large trades. However, it is key to price formation in the market, as many other trading mechanisms derive their prices from the prices formed on

exchange and MTFoperated CLOBs. Auction systems The traditional CLOB of trading venues is generally complemented by an auction system that, depending on the traditions of each country, can be at the preopening, at the close, or periodically during the day. The closing auction price has grown in importance as it is generally used to price investment funds. 5.12 Not contributing to price formation A further set of trading mechanisms does not contribute to price formation or contributes only partially, as they either refer to prices established elsewhere or do not publish pre-trade price information. Of these trading mechanisms: • Dark pools are multilateral – the trading venue matches incoming orders from buyers and sellers. • SIs, including Electronic Liquidity Providers (ELPs), are bilateral – all trades are done with a single institution. Dark pools or non-displayed markets The key characteristic of dark pools is that orders are not visible before execution. The matching

algorithm matches bids and offers at the mid-price on the lit venue (i.e, between the best Bid and the best Offer) As orders are not published before execution: • Traders are protected from market impact cost (i.e, the risk that visibility of their order moves the market price against them). • Traders are also protected from front-running by high-frequency traders. • The ability to trade at the mid-point of the Bid and Offer may also offer a price improvement compared with trading on a lit venue. • Dark pools are operated by RMs, MTFs, or individual investment banks. Page 47 of 195 Study on consolidation and reducing fragmentation in trading and post-trading infrastructures in Europe ELPs A number of firms have developed as ELPs, continuously providing firm two-way prices to institutions, under the MiFID I provision for SIs: • • • • The market maker can be “hit” on any side or both sides at the same time. This activity is complex, risky, and technologically

very demanding. Income is generated from the spread between the Bid and Offer prices. The market maker can also receive monetary advantages or privileges from the issuer. SIs Investment banks use the provision allowing for SIs to execute client orders against their own books before exposing them to other trading venues. The range of multilateral trading mechanisms is illustrated in Figure 10. Figure 10. Spectrum of equities trading services Source: Based on Cboe (2025). As a result of the changes introduced under MiFID I, MiFID II, and MiFIR, there is now a range of trading mechanisms and trading venues that enable investors to execute their trades in the way that best meets their need for size, immediacy, and price improvement. The On-exchange off-book market allows trades executed away from a venue’s order book to be reported to the exchange and optionally incorporated in its feed to clearing venues. 5.13 Retail trading Direct trading by retail investors (as opposed to

investment through collective investment vehicles) is a small part of the market but is important for the objectives of SIU. It is estimated that retail investors in the EU traded USD 12Page 48 of 195 Study on consolidation and reducing fragmentation in trading and post-trading infrastructures in Europe 14 bn monthly in 2024. Retail investors will normally place their orders with a bank or broker, which will then place those orders into one or more of a number of trading mechanisms serving the retail market in their home market and other markets that they choose to offer in Europe and worldwide: • • • • The order book of the national RM. The order book of an MTF with competing liquidity providers. A regional exchange with a single market maker (in Germany only). Placed directly with an ELP. The decision on which markets to offer to retail investors will usually come down to a balance of the cost of entering a given market against the likely retail demand. Small European

markets tend to be less easily accessible for retail investors than large markets outside Europe, as they are more expensive to enter and there is less investor demand. In specific cases, there are no fees for retail trades, as market makers are willing to make liquidity for retail trades, which are generally considered less informed. The practice of market makers paying for order flow (PFOF) is being phased out in Europe, as it has been shown to result in less favourable prices for retail investors. However, it is still used in Germany until 2026 (in line with the transitional exemption provided under Article 39a (2) of MiFIR, which allows Member States that applied PFOF before 29 June 2023 to continue doing so for a limited period). Market makers may also provide custody for retail brokers Thus, there are many options for retail investors to trade and invest both domestically and internationally, often free or for very low fees, but there are some concerns that low fees come with

less good execution 20. 5.14 Publication of data All trades are required to be published after they are completed. This post-trade data provides information on the volume being transacted and at what prices, while preserving the anonymity of the buyers and sellers. Thus, venues that do not contribute to price discovery still contribute to volume discovery. Pre-trade data is important for making trading decisions and is typically charged for by trading venues, depending on a number of factors. Data is commonly categorised into a number of levels: 20 AFM (2022), CNMV (2022). Page 49 of 195 Study on consolidation and reducing fragmentation in trading and post-trading infrastructures in Europe Table 4. Market data typology Level One Current best bid and offer, and volume available, are typically used by retail investors. Availability free of charge, with a delay, is mandatory Level Two Gives the five best bids and offers and the volume at each price, typically used by wholesale

market participants. Availability free of charge, with a delay, is mandatory. Full Order Book The entire contents of the order book, including all available prices and volumes and all changes, are typically required by market makers and sophisticated investors. Source: Based on Market Structure Partners (2025), p. 29 Pre-trade market data must be bought from individual trading venues, and there has been concern over the rising cost of market data and the complexity of fee schedules, which can be a barrier to investors entering new markets or intermediaries providing new services. However, to address these concerns, in June 2025, the European Commission published a draft Regulation specifying more detailed rules for access to and charging for market data. Statistical Note: MiFID II Articles 27 and 28 require certain disclosures by investment firms and execution venues on the location and quality of execution. Publication of these reports has effectively been suspended since 2021.

Similar reporting is, however, still required in the US under SEC Rules 605 and 606. Figure 11. Consolidated view of European liquidity in the most liquid equities 21, tn EUR, 2024. Source: Consultant calculations based on data from BMLL Technologies (2024). 5.2 Issues in equity trading For the most liquid equities, there are multiple trading venues creating choice and competition, but this gives rise to the question of whether it leads to the fragmentation of liquidity, ultimately resulting in a less efficient market. 21 Components of the Cboe Europe All Companies Index. Page 50 of 195 Study on consolidation and reducing fragmentation in trading and post-trading infrastructures in Europe It remains true that in each market, the majority of lit trading takes place on the national exchange, while MTFs have a minority share. In one sense, the MTFs may be seen as fragmenting trading between the national exchange and the MTFs. In another sense, however, the MTFs offer a less

fragmented solution than national markets, as they provide access to all the markets on a single platform (see Figure 12). Figure 12. On-venue trading by trading venue for selected indices (% of total by index, 2023). Source: AFME analysis of big xyt data. Market fragmentation is a complex concept. In Europe, trading venues are fragmented because there are multiple venues for trading securities, including several venues with different trading models that trade the same security. But the answers received from our interviews with market participants from both the Sell and Buy sides were unanimous: the present “fragmented situation” works very well. It is not only extremely efficient Still, it has encouraged the development of new trading technologies that have benefited the Buy side and investors in general. There is a consensus among market participants that MiFID I and II have been a success because they have allowed competition between trading venues. As a result, the incumbent

exchanges have been losing trading volumes, and new trading venues have been able to introduce new models of trading and new trading systems that largely improved the quoted prices, volumes, liquidity, and execution of trades. The reality behind this is that the execution requirements for an order for a small number of shares differ from those for a much larger number of shares. Although very transparent, the order-driven model of the incumbent Exchanges is not well-suited to the execution of large orders. Thus, the necessity is not only to create more competition between venues but also to allow trading with different market models other than the order-driven system. As a result, the current equity market structure is fragmented but extremely efficient in terms of the quality of prices, the price discovery process, and the depth and liquidity it provides to the market. Investors use brokers' expertise to trade in a way that meets their requirements for price, speed, market

impact, and so on. But of course, this is for a certain number of securities, the most liquid and Page 51 of 195 Study on consolidation and reducing fragmentation in trading and post-trading infrastructures in Europe most traded, representing the larger percentage of the total volume traded. The other securities, the medium and small cap shares, trade in a single venue that is generally the national RM. As soon as one of those shares becomes more interesting for a larger number of investors, it will be added to the “fragmented” trading options. While the academic literature presents a mixed picture, the viewpoints gathered from the interviews with market participants are supported by some empirical studies, which show that fragmentation can enhance market liquidity, particularly for large- and mid-cap stocks. Sometimes this effect can be observed at the consolidated liquidity level rather than at the local liquidity level. In contrast, some studies have found that the shift

in trading activity toward periodic auctions and dark mechanisms following MiFID II had no significant impact on either market liquidity or efficiency. However, other research shows that fragmentation can have negative effects, especially for small-cap stocks, or in connection with the growing market share of SIs. The latter is primarily attributed to the “cream skimming” effect, where SIs are taking away the liquidity supply from the market and trading more aggressively on the lit markets. Another important aspect mentioned in the academic literature is that fragmentation makes the market more resilient to liquidity shocks, not only during normal market conditions but also in times of stress. This is because it enables greater participation due to cheap and diverse trading and the boost in liquidity supply. Academic studies of the market share of different trading venues have found that around 2008-2012, the market share of the regulated markets decreased, while around 2020, the

share of the lit markets started to increase, mainly due to auctions, as shown for a representative security in Figure 13. Page 52 of 195 Study on consolidation and reducing fragmentation in trading and post-trading infrastructures in Europe Figure 13. The fraction of different trading venues for L’Oréal SA Source: Hagströmer (2022). Studies using the BMLL Technologies database (2024) have found that the listing exchange typically holds the largest market share, offers the lowest bid-ask spread, and has the greatest depth at the top of the book. It is worth noting that in France and in the UK, the sum of the market shares of the MTF venues is larger than the share of the listing exchange (see Figure 14). The results regarding spreads and the depth should be interpreted with caution, as average values can be misleading, so it would be valuable for future research to analyse these indicators on an intraday basis and study them at specific points in time, especially in light

of the order book dynamics, as some academic studies found that some MTF markets (e.g, Cboe) provide faster execution and lower order-totrade ratios, than the listing exchange Figure 14. Market share of different venues Source: Aramian & Comerton-Forde (2024a). Page 53 of 195 Study on consolidation and reducing fragmentation in trading and post-trading infrastructures in Europe Figure 15. Breakdown of on-exchange trading activity in the European market, annual total, bn EUR, 2024. Source: BMLL Technologies (2025a), Federation of European Stock Exchanges (2024), Stock Exchanges. Concerning where the trades are executed, there is also a difference between large-cap, liquid shares and medium and small-cap securities. The most liquid shares in Europe are traded in venues that are not the national RM. The Sell side explained in the interviews that they generally follow the same pattern when an order is received. They will first try to match the positions internally (they are

generally SIs). Then, to complete the order, they will go to the different dark pools, and then, only at the end, if they still need some volume, they will go to the national RM. This pattern is known in the market as “the waterfall” This has serious consequences for the incumbent exchanges as it means that for the most liquid shares, the price discovery process and price creation do not happen there. For shares that are traded in only one RM due to their liquidity, the situation is obviously quite different. Price discovery and execution happen at that RM In the academic literature, the term “pecking order of trading venues” has been widespread, which can be interpreted as the term “waterfall”, applied by practitioners. The pecking order states that investors initially trade in low-cost dark pools and shift to lit markets only when their need for immediacy increases with growing impatience. This theory has been analysed empirically according to Figure 16, which presents

the institutional order routing. The horizontal axis represents five sequential stages (quintiles) of order execution of the parent order, with the leftmost bars corresponding to the first 20% of the order being filled, followed by the next 20%, and so on. The vertical axis shows the distribution of child orders across various venue types at each stage of execution. Page 54 of 195 Study on consolidation and reducing fragmentation in trading and post-trading infrastructures in Europe Figure 16. Pecking order of trading venues in the function of parent order execution. Source: Hagströmer (2022). Empirical Analysis To get a clearer picture of market fragmentation, where trades are executed, and the liquidity of different venues, daily data between 1 January 2020 and 30 June 2025, provided by BMLL Technologies, has been analysed. The dataset contained 6 large-cap securities and 6 small-cap securities, from different countries and industries, as shown in Table 5: Table 5. Analysed

stocks Company Ticker Sector Country Large Cap Securities ASML ASML Technology The Netherlands LVMH MC Consumer Products & Services France TotalEnergies TTE Energy France Siemens SIE Industrial Goods & Services Germany Iberdola IBE Utilities Spain Enel ENEL Utilities Italy Small Cap Securities Weir Group WEIR Industrial Goods & Services UK SINCH SINCH Technology Sweden La Francaise des Jeux FDJU Travel & Leisure France Signify LIGHT Construction & Materials The Netherlands Page 55 of 195 Study on consolidation and reducing fragmentation in trading and post-trading infrastructures in Europe Company Ticker Sector Country Georg Fischer GF Industrial Goods & Services Switzerland Amplifon AMP Healthcare Italy Source: Data provided by BMLL Technologies (2024). BMLL Technologies split the trading venues into 22 venue types (see Figure 17) , which can be categorised into two main groups: Off-Exchange and

OnExchange venues. We use this classification throughout the analysis Figure 17. Trade classification by BMLL Source: BMLL Technologies (2025b). The main findings of the analysis relating to fragmentation and trade execution are: Turnover: • Around 50% +/-3% of trades are executed on MTF platforms for large-cap securities, and only around 30-40% are executed on Incumbent Regulated Markets (IRM). For the small-cap securities, the ratio of MTF trades varies from 33% to 56%, and the IRM trades are also nearly in the same range. • There is no significant difference in the distribution of turnover between trading venues where the trades are executed between large-cap and smallcap stocks. • The small-cap stock trading is fragmented as well; they are not traded solely on the IRM. Page 56 of 195 Study on consolidation and reducing fragmentation in trading and post-trading infrastructures in Europe • In recent years, the weight of platforms has shifted from OTC markets mainly to

the MTF markets and partly to the SIs in the case of the large-cap stocks, while in the case of the small-cap stocks, the regulated markets have gained market share as well. • Generally, the turnover of small-cap stocks declined over the period considered, while turnover for some large-cap stocks increased. • The most liquid, in terms of turnover, venues in the first place are off-book on-exchange trades on MTF markets, the second is the lit continuous trading on IRM markets, and the third is the lit continuous trading on MTF platforms (the lit closing auction is lagging behind just a little bit on the IRM markets). • On the lit markets, MTFs generally outperform RM markets regarding turnover across the three most liquid trading categories – continuous trading, closing auction, and off-book on-exchange trades – when considering their combined total turnover. Spread & European Best Bid and Offer (EBBO): The IRM market exhibits the lowest average daily spreads when measured

by the time-weighted mean bid-ask spread of the day, given in basis points relative to the time-weighted mean mid-point price (RelTWA spread); however, this dominance does not hold when using the volume-weighted mean bid-ask spread of the day, given in basis points relative to the volume-weighted mean mid-point price (RelVWA spread). (Note: daily spread values should be handled cautiously, as mentioned previously.) EBBO is more informative regarding liquidity, measured by the spread. 22 The IRM is setting the EBBO price during the majority of the events (events mean when the consolidated best ask price has improved). The majority means more than 60% of the time in the case of large caps, while in the case of the small caps, it is lower, ranging from 45% to 73%. It is important to note that IRM is not just setting the EBBO but may also be the lagger. Time at EBBO: although IRMs are setting the price mainly, the time at the EBBO is significant in the case of the MTFs as well. 22

Indicators applied: ­ TimeAtEBBO|Percentage: The percentage of time during the continuous trading period where there is at least one order equal to the bid price and simultaneously at least one order equal to the ask price of the CBBO. ­ EBBOSetter|AskMeanPercentage: The number of events where this venue improved the consolidated best ask price, as a percentage of the number of all consolidated ask price improvement events for the instrument. ­ EBBOLagger|AskMeanPercentage: The number of events where this venue was the last venue at the consolidated best ask price before the consolidated price subsequently worsened, as a percentage of the number of all consolidated ask price worsening events for the instrument. Page 57 of 195 Study on consolidation and reducing fragmentation in trading and post-trading infrastructures in Europe Table 6. Market share by type Large cap securities Turnover - ratio ASML ENEL IBE MC SIE TTE Off Exchange 20.35% 9.95% 1956% 1948% 2322% 1414% OTC

6.32% 3.57% 7.69% 7.35% 9.83% 6.13% SI 14.03% 6.38% 1187% 1213% 1339% 8.01% On Exchange 79.65% 9005% 8044% 8052% 7678% 8586% MTF 47.04% 4770% 4835% 5076% 4715% 5284% IRM 32.61% 4236% 3209% 2977% 2963% 3302% Small cap securities Turnover - ratio AMP FDJU GF LIGHT SINCH WEIR Off Exchange 8.52% 1934% 2214% 2606% 1040% 3025% OTC 1.84% 8.34% 8.32% 1369% 3.61% 1446% SI 6.68% 1100% 1382% 1236% 6.79% 1579% On Exchange 91.48% 8066% 7786% 7394% 8960% 6975% MTF 50.09% 4565% 3365% 4331% 3518% 4218% IRM 41.38% 3502% 4421% 3063% 5442% 2757% Source: BMLL Technologies. Based on the data of the last 12 months (1.072024 – 30062025), Table 6 shows the market share of each main type of venues (OTC – Over the Counter, SI – Systematic Internaliser, MTF – Multilateral Trading Facility, IRM – Incumbent Regulated Market) in the case of the large-cap and small-cap stocks. No significant difference can be seen between the two main groups. The offexchange transactions make up between 10 and 30% of the

trades In the case of the large stocks, the MTF transactions have the largest share, while in the case of the small caps, mostly the MTFs have the largest share, and in some instances, the IRMs. Page 58 of 195 Study on consolidation and reducing fragmentation in trading and post-trading infrastructures in Europe Figure 18. The growing use of MTFs Change in market share by venue type, 2021 and the last 12 months. Source: BMLL Technologies. Figure 18 shows how the market share of the main venue types – OTC, SI, MTF, and IRM – has changed from 2021 to the last 12 months. For all the stocks, the market share of OTC trading has decreased from 2021 to the previous 12 months. The ratio of MTF trading has increased for the large-cap securities, while the IRM has lost market share. This is not true for the small-cap securities, where, in some cases, the IRMs have also increased market share. Figure 19. Annual turnover by security Source: BMLL Technologies. Page 59 of 195 Study

on consolidation and reducing fragmentation in trading and post-trading infrastructures in Europe The figure shows the time series of the total turnover on a yearly basis for all the analysed securities. It is important to note that in 2025, the values are based on only half a year, so they are expected to grow to approximately twice the current value. For small-cap securities, the turnover is decreasing, or in the best case, it can be considered stable, while for some large-cap securities, there has been an increase throughout the years. Lit continuous, closing auctions, and off-book on the exchange are the most common trading types for large and small-cap securities. Figure 20. Trade classification - large-cap securities (12 months) Figure 21. Trade classification – small-cap securities (12 months) Source: BMLL Technologies. Page 60 of 195 Study on consolidation and reducing fragmentation in trading and post-trading infrastructures in Europe Figures 20 and 21 show the

total turnover in every trade classification category over the last 12 months for the large-cap and the small-cap stocks. The patterns are the same, but the magnitude of the turnover sum is significantly different. The maximum value in the case of the large-cap securities is approximately 26 times greater than the maximum value for the small-cap securities. Most trades are on the lit continuous platforms, the second largest category is the off-book on exchange trades, while the third largest is the lit closing auctions. In the following two figures, we split up these three categories into MTF and IRM trading to see where most of the liquidity can be found in terms of turnover. Figure 22. MTF turnover is significant but spread across multiple venues Turnover values on the different trading venues in three trade classification groups. Source: BMLL Technologies. Figure 22 shows the turnover values on different trading venues in three trade classification groups over the last 12 months

for large-cap stocks. The turnover values are shown separately for lit continuous trading, lit closing auctions, and off-book-on-exchange trades, across three MTF and IRM venues. The IRM markets are not fragmented, whereas notable fragmentation is visible on the MTF markets. If the turnovers of the MTF platforms were aggregated within each category, they would exceed those of IRM markets for all 6 large-cap stocks and for 5 out of 7 small-cap stocks. The lit continuous trading turnover is similar for the MTF and IRM markets; in closing auctions, the IRM market outperforms the MTFs; and for off-book-on-exchange orders, the MTF achieves higher turnover. Page 61 of 195 Study on consolidation and reducing fragmentation in trading and post-trading infrastructures in Europe Table 7. Key to MIC codes used in figures MTF-Multilateral Trading Facility MIC Venue name IRM - Incumbent Regulated Market MIC Venue name AQEU Aquis Europe XAMS Euronext AQXE Aquis XETR Xetra BATE Cboe

BXE XLON London Stock Exchange BOTC Cboe BXTR XMAD BME CEUX Cboe DXE XMIL Borsa Italiana CHIX Cboe CXE XPAR Euronext SGMU Sigma X MTF XSEB SIX EBBO Book SGMX Sigma X MTF XSTO Nasdaq Nordic TQEX Turquoise Europe XSWX SIX TRQX Turquoise XWBO Wiener Börse XEQT Equiduct Figure 23. Spreads are lower on IRMs Time-weighted average spreads for every stock. Source: BMLL Technologies. This figure presents the average RelTWA spread values for every stock. Data were deleted for those platforms where there were no trades every day in the last 12 months. The XEQT platform was also deleted, as the spread in this case was so huge that it would distort the figure, and the other values would not be visible adequately. The results show similar patterns, as was found in previous research, Page 62 of 195 Study on consolidation and reducing fragmentation in trading and post-trading infrastructures in Europe mainly that the spread is the lowest on the regulated

markets, and on the MTF platforms, the spreads are significantly higher. Figure 24. IRM has the lowest spread for large-cap ASML ASML volume-weighted spread. Source: BMLL Technologies. The time series of the RelVWA spread values is shown for a large-cap stock, ASML. It indicates that the IRM had the best liquidity from the RelVWA spread indicator’s point of view every day, but two MTF markets (AQEU, CEUX) did not significantly underperform the IRM market. Figure 25. Lowest spread is sometimes found on MTF for small-cap AMP AMP RelVWA spread. Source: BMLL Technologies. Page 63 of 195 Study on consolidation and reducing fragmentation in trading and post-trading infrastructures in Europe The time series of the RelVWA spread values is shown for a small-cap stock, AMP. Compared to the large-cap stock, in this case, the IRM market did not always have the best spread values, but the large-cap stock, in this case, the MTF markets sometimes outperformed it. IRMs generally lead in

setting the EBBO Figure 26. Share of Ask-side EBBO improvements by venue for large caps Figure 27. Share of Ask-side EBBO improvements by venue for small caps Source: BMLL Technologies. These figures present the EBBO settings on the ask side of the book in the last 12 months. The data show the number of events where a certain venue improved the consolidated best ask price, as a percentage of the number of all consolidated ask price improvement events for the instrument. Figure 26 presents the large caps, while Figure 27 shows the small caps. In both cases, the IRM platforms are setting the EBBO on the ask side – the same is true for the bid side as well. However, there are MTFs that also set the price in a significant number of events. Page 64 of 195 Study on consolidation and reducing fragmentation in trading and post-trading infrastructures in Europe But IRMs also lag in setting the EBBO Figure 28. Share of Ask-side EBBO Lagging events by venue for large caps Figure 29.

Share of Ask-side EBBO Lagging events by venue for small caps Source: BMLL Technologies. These figures present the EBBO laggings on the ask side of the book in the last 12 months. The data show the number of events where a certain venue was the last venue at the consolidated best ask price before the consolidated price subsequently worsened, as a percentage of the number of all consolidated ask price worsening events for the instrument. Figure 28 presents the results for the large caps, and Figure 29 presents the results for the small caps. In both cases, the IRM platforms are lagging the EBBO on the ask side for most of the events – the same is true for the bid side as well. However, there are MTFs that also lag the EBBO in a significant number of events. Page 65 of 195 Study on consolidation and reducing fragmentation in trading and post-trading infrastructures in Europe IRMs and MTFs both match the EBBO about equally Figure 30. Availability of EBBO across venues during

continuous trading – large caps. Figure 31. Availability of EBBO across venues during continuous trading – small caps. Source: BMLL Technologies. These figures present the percentage of time during the continuous trading period where there is at least one order equal to the bid price and simultaneously at least one order equal to the ask price of the EBBO. The period covers the data of the last 12 months. Figure 30 contains the data for the large caps, while Figure 31 shows the data for the small caps. It is interesting to note that for a significant amount of time, the EBBO is available not only at the IRM but also at the MTF platforms. In summary, the data show that trading activity is highly fragmented across venue types, with MTFs generally outperforming IRMs in turnover, especially for largePage 66 of 195 Study on consolidation and reducing fragmentation in trading and post-trading infrastructures in Europe cap stocks. In the case of spread and EBBO, the main finding

is that while IRMs tend to offer tighter spreads – measured with RelTWA – and dominate EBBOsetting activity in most cases, MTFs also contribute significantly to EBBO, underlining their rising importance in price formation despite more fragmented trading. Implications for the Buy-side Buy-side institutions – asset managers, pension funds, insurers– are unlikely to interact directly with trading venues themselves but give their orders to intermediaries to work for them, according to the investor’s preferences. The fragmented trading structure does, however, make it more difficult to judge whether the intermediary has achieved the best execution for the client, as there is no single price to compare with the prices at which an order was executed. A consolidated tape will help buy-side firms evaluate the execution performance of their brokers. The availability of a consolidated tape and the resulting EBBO raise the question whether there should be a European equivalent of the US

“trade through rule” Reg NMS to govern best execution. Reg NMS Reg NMS was adopted by the SEC in 2005 (and implemented in 2007) to modernise the National Market System by promoting competition between markets while at the same time linking them in a unified system. The most relevant section here is the “trade through” rule (Rule 611), which prohibits the execution of a trade at one venue at a price that is inferior to the price displayed at another. It only protects prices at the top of the book The possible consequences of Rule 611 are the proliferation of order types and fee schedules to take advantage of or work around the rule and the fragmentation of trading venues. Dark trading venues may have benefited from the rule, as it does not require orders to be routed to the venue displaying the best price, but simply prohibits execution at an inferior price 23. We believe Europe’s market structure means this is inappropriate for the following reasons. Even in the US, it is

not clear that the rule is beneficial. Although some buy-side firms rely on it as assurance of best execution, it only looks through to the top of the order book. It may result in clients trading on more “toxic” venues (that is, ones where the investor’s trading strategy may be revealed). It is thought to have resulted in greater fragmentation as it has encouraged the development of additional exchanges and the proliferation of order types and fees in order to retain business. 23 Comerton-Forde (2021). Page 67 of 195 Study on consolidation and reducing fragmentation in trading and post-trading infrastructures in Europe To be effective in Europe, every broker must connect to every venue. Whereas in the US, this requirement is supported by a single post-trade infrastructure, in Europe, it would also require brokers to join multiple post-trade infrastructures. Limiting the trade-through rule to just those venues that use an interoperable post-trade infrastructure would be

possible, but this would limit its effectiveness. In any case, the differences in post-trade processes and costs mean that best execution in Europe depends on not just price at execution but also related costs. Therefore, the best option for Europe appears to be for the requirement on brokers to achieve the best execution to remain without a trade-through rule 24. The availability of an EBBO on the consolidated tape will help the buy-side evaluate the performance of brokers. 5.3 ETFs ETFs are a key component of the investor ecosystem, not only for retail investors but also for institutional investors. The main players are the issuers, the Authorised Participants (APs) and the Market Makers. The issuers are the fund management companies that create, sell, and market ETFs. The APs are the companies that create and redeem the shares of ETFs; they use sophisticated models and technologies to price and provide the wholesale liquidity of the ETF. The Market Makers are the liquidity

providers in specific exchanges, always supplying prices for retail investors. ETFs are listed and traded on exchanges. Many ETFs are intended primarily for retail investors, so making them accessible to that market segment is important. Small brokers that sell ETFs in the local market are generally members exclusively of the local Exchange, and the issuers cannot limit the marketing of the ETF to global brokers or banks only. If they want to reach a certain type of retail investor, they need the know-how of local brokers. There are local regulations, taxes, listing, language, and settlement issues that oblige the promoter of the ETFs to list in each European country where they want to market the ETF. For example, some countries require local paying agents, translated documents, or impose differing tax and listing rules. 25 Originally, this required the same ETF to be listed on several exchanges and issued into the local CSD for each exchange to ensure that it would be treated as a

domestic and not an international investment. More recently, ETFs have been issued into one or the other of the two ICSDs, with local CSDs holding them there. This began at the end of 2013 when BlackRock used Euroclear; it was the first ICSD issuance for their iShares. However, smaller ETF issuers may face 24 FESE (2025). 25 ESMA, Follow-up Report to the Peer Review on the Guidelines on ETFs and other UCITS. See link; EIB study on counterparty and liquidity risks in exchange-traded funds. See link Page 68 of 195 Study on consolidation and reducing fragmentation in trading and post-trading infrastructures in Europe difficulties accessing the main markets, as there are barriers to their issues being accepted in ICSDs or CCPs. The fees for moving balances between ICSDs and CSDs are high for the retail market, where controlling costs is important. Furthermore, the market is still inefficient for ETF APs. They may buy and sell a particular ETF in several markets, with holdings in the

CSD for each market. Still, the creation/redemption process can only occur in one CSD, requiring the authorised participant to reposition their ETF holdings constantly. In our interviews, issuers and APs expressed their discomfort with this fragmented situation and the complexity and cost associated with covering Europe compared with the US. However, they also stated that they have now built systems to manage this complex situation. ETFs face a problem that is recurrent in this report: the diversity of legal frameworks (corporate law, tax), the multiplicity of CSDs, and the post-trade process. 5.4 Fixed Income Trading The deepest securities market in Europe is the government bond market, with a turnover of around EUR 100 bn per day. Government bonds do not require a prospectus or listing. Rather, the location of trading is determined by the Debt Management Offices (DMOs) of the respective governments. To ensure an orderly market for its debt, a DMO typically establishes a group of

primary dealers, which enjoy certain privileged access to auctions of new debt and, in return, are obliged to provide liquidity in the secondary market. The DMO monitors whether the primary dealers are meeting their obligations by requiring them to use a specified inter-dealer platform, which monitors their liquidity provision. The most widely used platform for this purpose is MTS, an MTF, which is 63% owned by the Euronext group and operates in the EU and the UK (though the Swedish DMO uses Nasdaq). It provides a single platform for trading government debt of 18 European countries and of the EU that is parameterised to incorporate the specific requirements of the DMO for each market. MTS Markets’ clearing and settlement arrangements are based on the agreement with MTS and the local DMO. Clearing and settlement arrangements vary by market and by investor preference: settlement arrangements are shown in Table 8 and the clearing arrangements are set out in Table 10 below. Page 69 of

195 Study on consolidation and reducing fragmentation in trading and post-trading infrastructures in Europe Table 8. Settlement locations for government bond trades on MTS MTS Cash Domestic Market MTF Available Settlement Institutions Austria Clearstream Banking Luxembourg, Euroclear Bank Cyprus Clearstream Banking Luxembourg, Euroclear Bank Czech Republic CDCP Prague EU Clearstream Banking Luxembourg, Euroclear Bank Germany Clearstream Frankfurt, Clearstream Banking Luxembourg, Euroclear Bank, Euroclear France Greece Bank of Greece Settlement System Hungary KELER Ireland Clearstream Banking Luxembourg, Euroclear Bank Netherlands Clearstream Banking Luxembourg, Euroclear Bank Portugal Clearstream Banking Luxembourg, Euroclear Bank Slovenia Clearstream Banking Luxembourg, Euroclear Bank Slovakia CDCP Bratislava Spain Iberclear, Euroclear France MTS France, France Euroclear France MTS Italy Regulated Market, Italy Euronext Securities Source: MTS

(Link). Figure 32. Sovereign bond volumes by distribution channel, tn EUR Source: ICMA, Secondary Market Practices Committee, European Secondary Market Data Report, H1 2024 – Sovereign Edition, p.10 Other electronic platforms serve the dealer-to-client market and the repo market. Page 70 of 195 Study on consolidation and reducing fragmentation in trading and post-trading infrastructures in Europe Corporate bond trading amounted to some EUR 10 bn per day in H1 2024. It takes place through Sis or Dealer-to-client (D2C) platforms. Figure 33. Corporate bond traded notional by distribution channel, tn EUR Source: ICMA Secondary Market Practices Committee, European Secondary Market Data Report, H1 2024 – Corporate Edition. Collateral markets Government bonds play a key role as collateral in the financial system. Sale and repurchase (“repo”) transactions are a form of collateralised interbank lending structured as a sale of securities from one party (the cash taker) to the

other party (the cash provider), with a commitment to buy them back at a future date, with the difference in price representing the cost of funding. Some EUR 13.3 tn of repos were outstanding in the EU at the end of June 2024 Based on ICMA survey data, around 60% of repos are traded directly between the two parties, 28% on automated trading systems (ATS), and 12% by voice brokers. A portion of repos are cleared through CCPs, mainly repos traded on ATS. The largest CCP for repos is LCH Repoclear SA, followed by Eurex Clearing. Government bonds are also used as collateral in other contexts, such as obtaining liquidity from National Central Banks (NCBs) and as collateral in CCPs. The efficiency of the collateral market depends on banks being able to mobilise all the collateral they hold, so that they can deliver any type of collateral to any counterparty. However, this is not always possible because of the number of FMIs and the different national rules that apply. For example, one

counterparty may not have a CSD account that enables them to receive a particular type of collateral, or they may not have the necessary tax status to receive a particular government bond. The Eurosystem Collateral Management System (ECMS), launched in June 2025, provides a unified system for managing assets used as Page 71 of 195 Study on consolidation and reducing fragmentation in trading and post-trading infrastructures in Europe collateral in Eurosystem credit operations, replacing the separate systems currently used by each NCB in the system. 5.5 Consolidated Tapes The Consolidated Tape (CT) issue has been discussed among market participants for a long time. ESMA published the conditions for participating in the tender and applying to be the provider of the CT. As the framework for the Fixed Income and Equities CT is clearly defined, the CT issue can be considered “closed” until the next review in five years. However, we wanted to have the opinion of the future users

and their view on the advantages, benefits, and limitations of the CT. Market participants’ views on consolidated tapes Views on Consolidated Tapes 26. Number of respondents Source: Consultants’ survey of market participants. Full results in Annex 3 The main conclusions from the interviews are: • The CT will be useful and used by the Buy side mainly for fund valuation purposes. • The CT will not be useful for the Sell side as they already have interconnected systems that allow them to trade and know the prices across the main platforms. • The CT for fixed income will not include the pre-trade information, which is seen as a major limitation to the usefulness of the CT. • The CT for equities will include, on the pre-trade information, only the best price. The absence of information on the complete queue and depth of prices will be a major limitation in the usefulness of the CT. 26 “No opinion” or “Don’t know” responses not shown. Page 72 of 195 Study on

consolidation and reducing fragmentation in trading and post-trading infrastructures in Europe • There are doubts about the quality of data coming from the fixed income CT, as it is known that the input of data contains a large number of mistakes, and the task of cleaning the data will be daunting. • For the equities CT, the distance between data centres in Europe will result in latency, which means the CT may not be attractive for a large number of potential users. • The CT, as it is designed, will solve only some of the problems of data dissemination and access. Solving the outstanding issues and finding the right balance between a fair dissemination of data and liquidity will be important in the next review in five years. The availability of an EBBO also creates an opportunity to revise the definition of the most relevant market for reference data purposes. For example, there is a proposal that the EBBO can be used to prepare an alternative closing price if the primary market

cannot run its closing auction. If market participants amend their systems to be able to use other sources of data, this will add to the resilience of markets, as other venues will be able to continue to operate if the primary market has an outage, unlike the experience in 2020 when outages at primary markets caused all venues to cease trading. 5.6 Market resilience There have been a number of occasions in recent years when exchanges have suffered outages in their trading systems. This resulted in an almost complete cessation of trading in their listed stocks, even though other trading venues were available. The reason appears to be that other venues relied on a reference price from the relevant RM, and that many market participants’ systems had hardcoded a reliance on RM price feeds. Cessation of trading is unnecessary when other trading venues are available. If market participants were unable to trade at a time of volatile prices, it could be a source of financial instability.

The absence of an official closing price can cause problems for fund managers required to value funds at the close. Solutions are available, particularly after the introduction of the CT, such as permitting alternative sources for reference and closing prices based on the EBBO, and ensuring that participants have the flexibility in their own systems to use them. 5.7 Trading: conclusions Based on the interviews, we conclude that market participants, both on the Sell side and the Buy side, do not want and do not need major changes in the trading infrastructure. They are satisfied with what MiFID I and II achieved, with the levels of competition achieved, and with the levels of depth and liquidity obtained since. Page 73 of 195 Study on consolidation and reducing fragmentation in trading and post-trading infrastructures in Europe Market participants’ views on trading My organisation can buy or sell shares that are in the main equity market indices/ government bonds in the

desired quantity within the desired time frame 27. Number of respondents Source: Consultants’ survey of market participants. Full results and composition of regional groups in Annex 3. One caveat is that the level of transparency can be improved. This issue is complex because there is a clear trade-off between liquidity and transparency: the more transparent a market is at the pre-trade level, the less likely it is to transact large volumes. Market participants are relatively happy with the present equilibrium between transparency and liquidity, but we believe that the pre-trade transparency of the SIs can be improved. Finally, the nature of the trading layer lends itself to the existence of overlapping, competing trading venues. This has the potential to strengthen market resilience, as no venue needs to be a single point of failure. However, this benefit is not currently realised, as the RMs are in many ways hard-wired into participants’ systems as providers of reference and

closing prices. Introducing a CT and an EBBO creates an opportunity to diversify away from this reliance and increase resilience. 27 “No opinion” or “Don’t know” responses not shown. Page 74 of 195 Study on consolidation and reducing fragmentation in trading and post-trading infrastructures in Europe Market participants’ views on trading and market data fees Tariffs for trading fees and market data at equity trading venues 28. Number of respondents. Do you face problems in relation to the complexity of fee schedules for market data in the government securities market? 29 Number of respondents. Source: Consultants’ survey of market participants. Full results in Annex 3 28 “No opinion” or “Don’t know” responses not shown. 29 “No opinion” or “Don’t know” responses not shown. Page 75 of 195 Study on consolidation and reducing fragmentation in trading and post-trading infrastructures in Europe 6. Clearing Clearing is the process of managing

trades between execution and settlement in order to reduce risk, carried out by central counterparties (CCPs). They do this by: • Interposing the CCP between the buyer and the seller on every trade so that the CCP assumes the counterparty risk. • Netting trades to reduce counterparty exposures, liquidity needs, and operational risk. • Managing this risk through the use of risk models and collecting margin to cover the risks assumed by the CCP in the event that one of the parties defaults. Clearing is a critical part of the post-trade process, as it manages counterparty exposures between trading participants and reduces settlement volumes and liquidity demand. Where an asset is traded across multiple venues, there are important benefits for market participants in being able to concentrate the clearing of a particular asset in a single CCP: • The maximum netting efficiency can be obtained by combining all trade flows. • Margin is calculated on the net open position, so it is

beneficial to combine offsetting positions to reduce margin requirements. The considerations are different when clearing derivatives. In most cases, a derivative contract is proprietary to the exchange where it is traded, so positions in the same contract will not arise from different exchanges. Securities, by contrast, are not proprietary, and the same security may be traded on multiple trading platforms, giving rise to potentially offsetable positions. Legislation and supervision The key piece of European legislation for CCPs is the European Market Infrastructure Regulation (EMIR). This establishes the requirements for a CCP to be authorised by its NCA. Following EMIR 22, there have been moves towards more integrated supervision with the establishment of the CCP Supervisory Committee in 2020 to enhance supervisory coordination. It reports to the ESMA Board of Supervisors but operates alongside ESMA. The Supervisory Committee takes the lead in relation to third-country CCPs, conducts

annual peer reviews of the supervision of EU CCPs, and is a member of CCPs’ colleges of supervisors. Under the CCP Recovery and Resolution Regulation, national authorities have the responsibility to intervene in the event of a CCP facing financial difficulties. They can either require the CCP to take steps to recover its financial position or put it into resolution to protect financial stability and minimise costs to taxpayers. Page 76 of 195 Study on consolidation and reducing fragmentation in trading and post-trading infrastructures in Europe Table 9. Mapping of EU Legislation in the Area of Securities Clearing in the EU Capital Markets Law. Legal Instrument Area of Regulation EMIR European Market Infrastructure Regulation (EU) No 648/2012 SFD Settlement Finality Directive 98/26/EC FCD Financial Collateral Directive 2002/47/EC SFTR Securities Financing Transactions Regulation (EU) 2015/2365 CCP Recovery and Resolution Regulation (EU) 2021/23 6.1 Objective / Scope

Remarks / Status Central clearing obligations, trade reporting, and risk mitigation for OTC derivatives Reduce counterparty and systemic risk in the derivatives market Revised by EMIR 2.2 and EMIR Refit (Regulation (EU) 2019/834) and EMIR 3.0 proposal (COM/2022/697) Settlement finality in payment and securities settlement systems applies to designated systems and their participants. Reduce the risks associated with payments and securities settlement systems, especially in the event of insolvency. Relevant to systemic risk protections Implemented by various legal instruments in MS. Provision of financial collateral under security arrangements; applies to financial institutions and public bodies. Facilitates the use of financial collateral with minimal formalities In force. Transparency and reporting requirements for securities financing transactions. Improve transparency in repo and securities lending markets and monitor systemic risks. In force, complements EMIR and MiFID.

Recovery and resolution planning for CCPs. Ensure orderly recovery or resolution of CCPs and avoid systemic disruptions. In application since 2022. Pending review following the 2021 targeted consultation by the Commission and the final report (COM (2023) 345) from June 2023. Implemented by various legal instruments in MS. CCP clearing in Europe There are 14 CCPs in the EU authorised under EMIR, plus three recognised thirdcountry CCPs in the UK and one in Switzerland linked to EU trading venues. CCPs in the UK and Switzerland participate in an interoperability arrangement with an EU CCP. Table 10. Product authorisation of European CCPs that clear securities Equities Debt Repo EU CCPs AthexClear BME Clearing Page 77 of 195 Financial derivatives Energy, commodities and other Study on consolidation and reducing fragmentation in trading and post-trading infrastructures in Europe Cboe Clear Europe NV CCP.A Eurex Clearing Euronext Clearing KDPW CCP KELER CCP LCH SA SKDD-CCP

Non-EU CCPs LCH Ltd SIX x-clear Source: ESMA register and CCP websites. The total initial margin held by CCPs in relation to securities trading is over EUR 70 bn 30. Table 11. Initial margin held by CCPs (2024 q3, mn EUR) Equities Fixed income EU CCPs Eurex Clearing 20 847 31 6 952 - 27 682 Euronext Clearing 10 802 10 953 Cboe Clear 1 026 - BME Clearing 369 318 KDPW CCP 229 225 LCH SA CCP Austria 60 AthexClear 16 KELER CCP 6 SKDD-CCP 0 CCPs outside the EU clearing EU trading venues LCH Ltd 3 497 SIX x-clear 9 006 1 431 Source: Quantitative Public Disclosure reports by respective CCPs. Statistical Note: Table 11, Figure 34, Figure 35 indicate the size and growth of CCPs in Europe based on data provided in the Quantitative Public Disclosure report published by each CCP. CPSS-IOSCO published the disclosure framework in 2015 to improve the overall transparency of 30 Excludes equities margin at Eurex clearing which includes equity derivatives. 31 Includes

equity derivatives. Page 78 of 195 Study on consolidation and reducing fragmentation in trading and post-trading infrastructures in Europe financial market infrastructures. However, the data in these reports is problematic, as it is not provided consistently across the different CCPs, and some CCPs do not disclose all categories of data. It is unclear who is responsible for ensuring the consistency of the data Figure 34. Average daily notional value of cleared equity and bond trades, tn EUR, 2024 32. Source: Quantitative Public Disclosure reports by respective CCPs. Figure 35. Gross notional outstanding of novated but not-yet settled securities transactions across clearing services, tn EUR, 2024 33. Source: Quantitative Public Disclosure reports by respective CCPs. For equities, most lit trading platforms – regulated markets and MTFs – route trades through a CCP. In addition, trades executed elsewhere and reported to an exchange may be routed to clearing. However, given

the increasing share of 32 Explanation of figures in the graph: 1 – Data for LCH Ltd and Eurex Clearing is unavailable, 2 – Data for 2019 is unavailable, 3 – Including NASDAQ Clearing, KDPW CCP, CCP Austria, ATHEXClear, KELER CCP, and SKDD CCP. 33 Explanation of figures in the graph: 1 – Data for Eurex Clearing is unavailable, 2 – Data for 2019 is unavailable, 3 – Including NASDAQ Clearing, KDPW CCP, CCP Austria, ATHEXClear, KELLER CCP, and SKDD CCP. Page 79 of 195 Study on consolidation and reducing fragmentation in trading and post-trading infrastructures in Europe equity trading executed through other mechanisms, only a portion of the trades executed are cleared. Vertical integration: one trading platform to one CCP. An exchange is in the same corporate group as a CCP, and trades are all routed from the exchange to the CCP with no alternatives. This is the case in Austria, Greece, Hungary, and Poland. In Croatia, the CCP is independent of the exchange, but there is

nevertheless a direct relationship. Preferred clearing: trading platform to CCP with a choice. An exchange routes trades to a CCP selected by the exchange, but users may use a different CCP if both parties to a trade agree. This is the case in Germany and the Euronext markets. This model is known as ‘preferred clearing’ Trading platform to interoperable CCPs. A trading platform routes trades to a group of interoperable CCPs, enabling buyers and sellers to use different CCPs. This is the case in the Nordic countries, Switzerland, the UK, and many cross-border MTFs, including Aquis, Cboe Europe, Turquoise, etc. No CCP Some smaller markets do not use a CCP because of the significant cost of establishing one and the limited netting opportunities available. This is the case in Bulgaria, Cyprus, the Czech Republic, Malta, Romania (where a CCP is developing), and Slovenia. Table 12. Clearing arrangements by market 34 Country National equity market Government bonds (on MTS unless

otherwise shown) Euronext markets Belgium France Ireland Italy LCH SA (optional) Preferred clearing: Euronext Clearing + some interoperability with 3CCP 35 members Netherlands LCH SA (mandatory) LCH SA (optional) Euronext Clearing LCH SA (optional) 34 CCP clearing is not mandatory for cash market trades concluded on regulated markets. 35 3CCP means the interoperable group of Cboe Clear, LCH Ltd and SIX X-clear. Page 80 of 195 Study on consolidation and reducing fragmentation in trading and post-trading infrastructures in Europe Country National equity market Government bonds (on MTS unless otherwise shown) Interoperable: 3CCP LCH SA (optional) Portugal Norway Nasdaq markets Denmark Finland Interoperable: 3CCP Sweden LCH SA (optional) (Nasdaq platform) Estonia, Iceland, Latvia, Lithuania No clearing SIX/BME Spain BME-Clearing LCH SA (optional) Switzerland Interoperable: 3CCP Others Austria CCP Austria LCH SA (optional) Germany Preferred clearing: Eurex

Clearing + 3CCP LCH SA (optional) Greece Athex Clear Hungary KELER CCP Luxembourg Euronext Clearing Poland KDPW CCP KDPW CCP Slovenia SKDD-CCP LCH SA (optional) UK Interoperable: 3CCP LCH Ltd (mandatory) Bulgaria, Croatia, Cyprus, the Czech Republic, Malta, Romania, and Slovakia No clearing KELER CCP (mandatory) Source: Websites of MTS and Exchanges. 6.2 Alternative models for multi-market clearing As trading models have developed with the same securities traded on different platforms, different models have developed for clearing those trades. 6.21 Interoperable clearing Interoperable clearing enables a group of CCPs to have accounts with each other, so when a clearing member of one CCP has an exposure to a clearing member of another CCP, the two CCPs take this as an exposure between Page 81 of 195 Study on consolidation and reducing fragmentation in trading and post-trading infrastructures in Europe themselves. This means that a clearing member can

concentrate all its clearing for a particular security in one CCP, even though it may be traded on different platforms and with counterparties clearing through different CCPs. Interoperable clearing is governed by guidelines established by ESMA in 2013. These include a requirement that there is no restriction on extending the interoperability arrangement to other CCPs, other than on risk grounds. The current interoperable model includes three CCPs (Cboe Clear, LCH Ltd, and SIX x-clear) 36. The structure is illustrated in Figure 36 Figure 36. Interoperable CCP model Source: based on CCP Interoperability Arrangements, European Systemic Risk Board, 2019. The use of interoperability between the CCPs is shown in Table 13. Table 13. Use of CCP interoperability (end-September 2024) Percent of total trade values cleared through the link to Cboe Clear Cboe Clear LCH Ltd 10 SIX x-clear 15 LCH Ltd SIX x-clear 17 11 14 23 Source: Quantitative Public Disclosure reports of the CCPs. The

CCPs in the interoperable arrangement provide clearing across multiple markets. However, as the CCPs in the arrangement are accepting exposures to each other, additional margin is required, which is passed on to clearing members in addition to the standard initial margin. As a result, the margin requirements for interoperable clearing are higher but only incurred once. 36 An interoperable arrangement between LCH SA and Euronext Clearing for Italian government bond trades appears to have ended. Page 82 of 195 Study on consolidation and reducing fragmentation in trading and post-trading infrastructures in Europe As an illustration, Figure 37 illustrates the transaction flow for the Swedish market. Figure 37. Illustration of transaction flow in Swedish equities (size of bars is purely illustrative). Source: Consultant analysis. Clearing interoperability is popular with users, as it enables them to concentrate their clearing across multiple markets in a single CCP, bringing

efficiency in netting and overall margin requirements. The ability to choose between CCPs has introduced a degree of competition, significantly reducing clearing fees. In addition, it is resilient against a single point of failure. 6.22 Preferred clearing Under the MiFIR and MiFID II requirements, CCPs may request access to trading venues to offer clearing services. To grant a new CCP access, EMIR requires steps to be implemented to prevent market liquidity from becoming fragmented. Without an interoperability arrangement, this may be achieved by ensuring that (at least some) clearing members are already (or become) members of both CCPs. In this manner, and provided the shared membership is sufficiently wide, counterparties trading on the venue are able to choose which CCP to clear through, thereby avoiding liquidity fragmentation. Page 83 of 195 Study on consolidation and reducing fragmentation in trading and post-trading infrastructures in Europe Figure 38. Preferred

clearing model Source: based on CCP Interoperability Arrangements, European Systemic Risk Board, 2019. Under the preferred clearing model, a local market participant that only trades on the local exchange can concentrate its clearing activity in the local CCP. However, an international participant that trades the same securities on multiple platforms will have to divide their clearing activity between the local CCP and an international CCP, depending on where the trade is executed and who the counterparty is. This is shown in Figure 39, flows in French securities from trading through to settlement. Figure 39. Illustration of transaction flow in French equities Source: Consultant analysis. The preferred clearing model’s advantage is that it enables local market participants, who only trade on the local exchange, to continue using the local CCP. Because of their size, many of them would be ineligible to join the larger CCPs as clearing members. However, for international banks, it

requires them to divide their clearing between the local CCP and their chosen interoperable CCP, which diminishes the benefits of netting and margining. Page 84 of 195 Study on consolidation and reducing fragmentation in trading and post-trading infrastructures in Europe 6.23 No model Finally, there is a growing number of markets where shares may be traded either on the national exchange or on a number of MTFs, but no clearing arrangements have been put in place. All trading on the national exchange is cleared in the local CCP, and all trading on the MTFs is cleared through the interoperable clearing arrangement. As an illustration, Figure 40 illustrates the transaction flow for the Austrian market. Figure 40. Illustration of transaction flow in Austrian equities Source: Consultant analysis. Page 85 of 195 Study on consolidation and reducing fragmentation in trading and post-trading infrastructures in Europe 6.3 Clearing: options for enhancement Market participants’

views on securities clearing in Europe Agreement or disagreement with the statements on CCP clearing arrangements 37. Number of respondents By "efficient", we refer to the ability of CCP arrangements to handle large volumes, provide effective netting cycles, ensure timely collateral and margin call processes, and offer up-to-date risk reporting. By cost-effective, we refer to whether the CCP services deliver good value for money, considering both the level of fees and the quality of service. Do you face problems in relation to the complexity of fee schedules for CCPs 38. Number of respondents Source: Consultants’ survey of market participants. Full results and composition of regional groups in Annex 3. 37 “No opinion” or “Don’t know” responses not shown. 38 “No opinion” or “Don’t know” responses not shown. Page 86 of 195 Study on consolidation and reducing fragmentation in trading and post-trading infrastructures in Europe Market participants’

views on the preferred direction for the development of clearing for European securities Agreement or disagreement with the statements on the preferred direction for the development of clearing for European securities 39. Number of respondents. Source: Consultants’ survey of market participants. Full results in Annex 3 As discussed above, interoperable clearing enables each market user to consolidate all their trades across multiple venues and with multiple counterparties in a single CCP. This maximises the potential netting benefits for users, supports competition, and reduces reliance on a single infrastructure. In the absence of an interoperability arrangement, the additional cost of establishing a clearing arrangement in a local CCP, either as a clearing Member or through a local Clearing Member, can act as a barrier to entering a local market. The objective, therefore, should be to extend interoperable clearing as widely as possible. This can, in principle, be achieved within

the current arrangement If an additional CCP were to join the interoperability arrangement, then, following agreement among the CCPs, the proposal would need to be approved by the respective NCAs, the colleges of supervisors, and the ESMA CCP Supervisory Board. Currently, there is no overlap in the coverage of securities cleared by CCPs outside the interoperability arrangement (for example, Euronext Clearing does not clear German securities, and Eurex Clearing does not clear securities traded in Euronext markets). This simplifies the interoperability arrangements, as the new CCPs joining the interoperability framework would not interoperate with each other. As clearing interoperability originally included four CCPs (before EMCF merged with EuroCCP), its viability for a larger group has already been demonstrated. The way forward, therefore, will be a combination of: • Requirement for CCPs above a certain market size to enter into interoperability arrangements. • Reduction in the

total number of CCPs as larger CCPs take over responsibility for clearing smaller national markets by absorbing the local CCPs, either bringing them into European clearing or into regional clearing. However, the ideal ultimate number of CCPs remains greater than one. 39 “No opinion” or “Don’t know” responses not shown. Page 87 of 195 Study on consolidation and reducing fragmentation in trading and post-trading infrastructures in Europe • Consolidation and interoperability increase the importance of moving to central supervision of CCPs. Their role as risk-taking entities and the implications of a CCP’s failure for financial stability require reconsideration of where responsibility for managing the recovery or resolution of CCPs should rest. Additional measures that would be beneficial: • Given their crucial role in securities markets, extending access to securities by CCPs is vital for trading firms and issuers: setting an unnecessarily high requirement for a

security to be cleared or for a broker to have access to clearing creates a further barrier to cross-border markets. There should be a presumption that an external CCP starting to provide clearing services for a market will do so for the same range of securities as the domestic CCP and will have entry requirements for CMs that do not preclude local CMs from participating. Similarly, a CCP should not set an unreasonably high business requirement for admitting securities to clearing when this is the condition for being admitted to trading. The only consideration for admitting securities and CMs should be prudent risk management, not commercial considerations. The intention is to ensure that external CCPs do not just provide services for the top tier of securities but also for large CMs. • At present, the leg of a transaction between a broker and the custodian or prime broker acting for the client is not generally cleared in Europe, whereas in the US market, it is accepted into

clearing. Consideration should be given to exploring opportunities to bring buy-side trades into clearing (like CNS in the US), increasing netting efficiency. Page 88 of 195 Study on consolidation and reducing fragmentation in trading and post-trading infrastructures in Europe 7. Settlement and safekeeping CSDs form the foundational layer of the securities value chain, providing services that facilitate the issuance, custody, and settlement of financial instruments. They support the whole trading, clearing, and settlement process and thus enhance market stability and investor trust. Two pieces of EU legislation – the Central Securities Depositories Regulation (CSDR) and the Settlement Finality Directive (SFD) – principally regulate the activities of settling securities transactions and safekeeping securities. The latter requires transposition in addition to national legislation. Table 14. Mapping of EU Legislation in the Area of Securities Settlement in the EU Capital

Markets Law. Legal Instrument Area of Regulation Objective / Scope Remarks / Status CSDR Settlement of financial instruments, authorisation and supervision of CSDs, and settlement discipline Harmonise post-trading infrastructure in the EU, ensure timely and secure settlement, and increase efficiency Revised by CSDR Refit – Regulation (EU) 2023/2845 Settlement finality in payment and securities settlement systems applies to designated systems and their participants Reduce the risks associated with payments and securities settlement systems, especially in the event of insolvency. Relevant to systemic risk protections Applies to designated systems and their participants Provision of financial collateral under security arrangements; applies to financial institutions and public bodies Facilitates the use of financial collateral with minimal formalities In force Transparency and reporting requirements for securities financing transactions Improve transparency in repo and

securities lending markets, and monitor systemic risks In force, complements EMIR and MiFID Use of distributed ledger technology in post-trading (settlement and recording of financial instruments) Enable innovation in market infrastructure using blockchain while preserving investor protection In force since 2023, the temporary regime for market testing. Central Securities Depositories Regulation (EU) No 909/2014 SFD Settlement Finality Directive 98/26/EC FCD Financial Collateral 2002/47/EC SFTR Securities Financing Transactions Regulation (EU) 2015/2365 DLT Pilot Regime Regulation (EU) 2022/858 Source: Consultant analysis. Page 89 of 195 Study on consolidation and reducing fragmentation in trading and post-trading infrastructures in Europe A CSD is a legal entity that operates a securities settlement system (SSS) and provides at least one other core service listed in the Annex of Regulation (EU) No 909/2014: • The notary service (book-entry recording of issues). • The

central maintenance service (managing securities accounts). From a legal standpoint, CSDs are subject to the dual legal framework: a combination of EU-level regulation and national legal regimes. Under CSDR, CSDs must obtain an authorisation from the NCA of the Member State in which they are established. This authorisation is a condition for operating a securities settlement system and providing the core CSD services defined in Annex A of the Regulation. However, despite this harmonised EU regulatory framework, CSDs remain national legal entities, typically established as companies (e.g, public limited liability companies or equivalent legal forms) governed by domestic company law. Their corporate status, internal governance structure, ownership arrangements, and liability rules are defined under the national legal system of the Member State of incorporation. Moreover, several legal aspects relevant to the operation of a CSD, such as contract law, insolvency law, property law

(especially rules on the holding and transfer of securities), and rules on the enforceability of collateral, are not fully harmonised at the EU level. These areas remain subject to national law, as acknowledged in Recital 7 and other provisions of the CSDR and the SFD. Thus, while the CSDR establishes a uniform EU framework for core operational and prudential requirements of CSDs (e.g, authorisation, capital, risk controls, access, settlement discipline), the legal foundation and many complementary rules stem from the national legal orders, leading to a layered and sometimes fragmented legal environment for post-trading infrastructure. This dual nature has implications for the cross-border provision of services, legal certainty, and potential consolidation of post-trade infrastructures. The SFD aims to reduce the systemic risk associated with participation in payment and securities settlement systems, particularly the risk linked to a participant’s insolvency. SSS are designated by

Member States and notified to ESMA. In most cases, there is a single institution in each country that is both the authorised CSD and the SSS. The exceptions to this are: • Central banks that provide securities safekeeping and settlement services are not required to be authorised as CSDs under CSDR 40 but are specified 40 CSDR Art 1(4) „Articles 10 to 20, 22 to 24 and 27, Article 28(6), Article 30(4) and Articles 46 and 47, the provisions of Title IV and the requirements to report to competent authorities or Page 90 of 195 Study on consolidation and reducing fragmentation in trading and post-trading infrastructures in Europe • • • • as SSS. This applies to the central banks of Belgium, Bulgaria, and Greece, which are designated as SSS for government securities. In addition, the European Commission uses the National Bank of Belgium as the issuer-CSD for EU debt securities. In the Baltic countries, Latvia has one authorised CSD/SSS, which is also the designated SSS in

Estonia and Lithuania. In Ireland, there is no CSD or SSS, and Euroclear Bank in Belgium provides these services. In Cyprus, there is no authorised CSD, and these services are provided by a stock exchange department, the designated SSS. Consequently, the number of SSSs is greater than the number of CSDs, as some CSDs are designated as SSS in more than one Member State. Table 15. Number of securities settlement and depository institutions in the EU (end-2024). Type of Institution Number CSDs authorised under CSDR 26 CSDs operated by Central Banks 3 SSSs designated under SFD 32 Source: CSDs: ESMA CSD Register, CSDs operated by central banks: Belgium, Bulgaria and Greece. Does not include the Czech National Bank’s short-term bonds system SSSs: ESMA SFD Designated Authorities and Systems Register. Excludes clearing houses In addition to national CSDs, there are two International CSDs (ICSDs) based in the EU, Euroclear Bank (in Belgium) and Clearstream Banking SA (in

Luxembourg). Both are authorised as CSDs under CSDR and as SSS under SFD. Originally established to streamline the issuance and settlement of Eurobonds, ICSDs today play a distinct and complementary role within the posttrade infrastructure, specialising in the issuance, safekeeping, and settlement of cross-border and internationally traded securities. Unlike national CSDs, which primarily serve domestic markets, ICSDs operate globally, facilitating the settlement and custody of international bonds, equities, and a broad range of financial instruments across multiple jurisdictions. They play a significant role in some domestic government bond markets within the EU. Figures 41, 42, and 43 give an indication of the relative size of CSDs in the EU and non-EU European countries, measured by assets under custody and the number and value of transactions settled. The industry is very concentrated, with relevant authorities or to comply with their orders under this Regulation, do not apply to

the members of the ESCB, other Member States’ national bodies performing similar functions, or to other public bodies charged with or intervening in the management of public debt in the Union in relation to any CSD which the aforementioned bodies directly manage under the responsibility of the same management body, which has access to the funds of those bodies and which is not a separate entity.” Authorisation of a CSD is art 16 Page 91 of 195 Study on consolidation and reducing fragmentation in trading and post-trading infrastructures in Europe the Euroclear and Clearstream groups of CSDs carrying out the bulk of the business and a long tail of much smaller entities. Figure 41. Assets under custody at CSDs by CSD group, bn EUR, 2023 Source: ECSDA database (2023), BNB and Bank of Greece websites. Figure 42. Number of transactions settled by CSD group, m EUR, 2023 Source: ECSDA database (2023), BNB and Bank of Greece websites. Page 92 of 195 Study on consolidation and

reducing fragmentation in trading and post-trading infrastructures in Europe Figure 43. Value of transactions settled by CSD group, bn EUR, 2023 Source: ECSDA (2023), BNB, and Bank of Greece websites. 7.1 Functions of CSDs In the primary market, CSDs facilitate the initial documentation of securities, the safe issuance and initial distribution of securities, the accurate registration and availability of newly issued instruments for trading, and the integrity of the issue over its lifecycle. National CSDs register all types of securities on securities accounts – equities, corporate and government debt securities, investment funds, ETFs, warrants, and other structured products. Securities are kept in immobilised and/or dematerialised form. Depending on the local laws, regulations, and/or market practices, securities account management services may be conducted through direct or indirect (intermediary) holding arrangements or a combination. In a direct holding system, each

beneficial or direct owner of the securities maintains an account with the CSD. Conversely, an indirect holding system utilises a multi-tiered structure for the custody and transfer of ownership of securities, with investors recognised only at the level of their custodian or intermediary. This may make significant differences in the operational arrangements for CSDs. In some countries, the requirement to open accounts for individual beneficial investors results in the CSD operating millions of accounts (e.g, over 8 million in Romania), while in other countries, there are only a few thousand or fewer. In the secondary market, CSDs enable the efficient transfer of ownership of securities traded on stock exchanges, alternative trading platforms, OTC marketplaces, or as instructed by the securities account owner. Book-entry securities transactions are settled on a free of payment (FOP) or against payment (DvP – delivery versus payment) basis. While in the first case, Page 93 of 195

Study on consolidation and reducing fragmentation in trading and post-trading infrastructures in Europe the CSD handles only the movement of securities between the securities accounts, DvP transactions involve the simultaneous, final, and irrevocable exchange of payment and assets. The principal risk, which is a post-trade counterparty risk, is effectively mitigated by DvP settlement. The cash leg settles in most cases in central bank money, but some CSDs offer banking services as well, enabling cash settlement in commercial bank money. CSDs also provide non-banking-type ancillary services that do not entail credit or liquidity risks. Some of the most common such services are trade verification and settlement matching services, securities lending and borrowing, collateral management services, corporate actions management, securities registry management, reporting services, and cross-border settlements. Although only a handful of EU CSDs offer this service, CSDR permits CSDs to offer

limited banking-type ancillary services (cash account management, payment services, FX, and overnight credit) as well. The custodian alternative Very few investing institutions or individuals hold their assets directly in CSDs. Instead, they mostly use custodians, even in their home market. In addition to holding securities and managing settlement, most custodians provide a range of other services that make them more attractive to institutions than becoming members of CSDs themselves. These services include cash management and FX, portfolio valuation, collecting income and recovering withholding tax, and voting at general meetings. Where an investor holds assets across multiple markets, the custodian (or a global custodian) manages this by having direct accounts in multiple CSDs or using local sub-custodians in different markets. Retail investors typically obtain a similar service through their bank or broker. However, this convenience and service come at a price – each additional

layer embeds costs that the investors ultimately bear, although some retail trading platforms do not charge for custody. Custodians must decide how they will hold assets across multiple markets. Their options (which can be combined) are: • To use a local sub-custodian in each national market. • To become a direct participant in multiple CSDs. • To concentrate holdings in one CSD and use its links to other CSDs. The most common approach is for a global custodian bank to use a local subcustodian bank in each market. Sometimes the sub-custodian will be a local subsidiary of the global custodian. The local sub-custodian has the benefit of Page 94 of 195 Study on consolidation and reducing fragmentation in trading and post-trading infrastructures in Europe understanding the local legal and tax environment and having access to liquidity in the local currency (where this is not the euro). However, this adds another layer of cost between the end-investor and the issuer, which may

deter the global custodian from entering smaller markets. Direct participation in multiple CSDs is the route chosen in the largest European markets. Some regional banks also have direct memberships in individual national CSDs of the specific region. However, the custodians’ ability to offer standardised services to their clients is limited by the underlying issues of different laws, interfaces, fee schedules, etc. Through links between CSDs (investor CSD to issuer CSD), a CSD participant might use links it has developed with other CSDs, so that users of the first CSD can also hold securities issued into the second CSD. There is an extensive network of links established between CSDs in Europe 41, shown in Figure 42. (The columns show the Investor CSDs, and the rows show the Issuer CSDs. The colours indicate whether the link is direct (Investor CSD opens an account with Issuer CSD), indirect (Investor CSD uses a custodian bank to hold securities), or through another CSD. The most

heavily used link is between the two International CSDs, Euroclear Bank and Clearstream Banking SA, known as “the bridge”, for settling transactions in international bonds. Banks also use the ICSDs’ links to domestic CSDs to hold government securities because of the access to settlement with international counterparties and banking/collateralisation services provided. This is less common for equities, as greater importance is attached to being close to the issuer for managing corporate actions. Although links exist, they appear to be relatively little used (but no data is available on the use of CSD links). 41 These are identified in the ESMA CSD Register. Page 95 of 195 Study on consolidation and reducing fragmentation in trading and post-trading infrastructures in Europe Figure 44. Table of links between European CSDs Source: ECSDA links matrix. Information is not available for CSDs operated by central banks in Belgium, Bulgaria, and Greece. Market participants’ views

on services provided by CSDs Agreements and disagreements with statements on CSD services 42. Number of respondents. Source: Consultants’ survey of market participants. Full results and composition of regional groups in Annex 3. Settlement internalisation Settlement internalisation takes place when a financial institution settles a transaction between itself and a client or between two of its clients across its own 42 “No opinion” or “Don’t know” responses not shown. Page 96 of 195 Study on consolidation and reducing fragmentation in trading and post-trading infrastructures in Europe books without passing through a CSD. Settlement internalisers are typically financial institutions, like banks or brokers. The most recent data on internalised settlement comes from an ESMA report in 2020. This suggests that, in aggregate, the number of internalised settlements is almost equivalent to the number processed in CSDs but amounts to only a third of the value. Table 16.

Settlement values and volumes internalised and at CSDs, 2020 Number of settlements (million) Value of settlements (trillion EUR) Internalised settlements* 475 313 Settlements in EU CSDs 488 1 097 Source: ESMA (2020) and ECSDA data. * Q1-3 at annual rate. It is hard to draw conclusions from the data – the largest number of settlement internalisers is in Germany, but the largest number and highest value of transactions were in Belgium. The greatest value of transactions was related to collateral management operations and with professional rather than retail counterparties. Table 17. Data on internalised settlement, Q1-Q3 2020 (not annualised) Number of internalised settlements (million) Value of internalised settlements (trillion EUR) Number of settlement internalisers Belgium 108 103 12 Germany 90 13 1 240 France 19 75 132 Total 357 234 2 338 Source: ESMA (2020). Settlement internalisation reduces costs for the institutions carrying it out, as they do not

pay CSD fees or, in some cases, additional T2S fees. They may also benefit from operational efficiencies from processing transactions internally. It is tempting to think that if all the internalised settlements were instead passed through external CSDs, then their unit costs could be roughly halved. However, this is unlikely to happen, given that these are by definition internal movements. Additional and more up-to-date information is needed to better understand whether the transactions currently settled internally could have been passed through CSDs and what the implications would have been. Note: under Article 74.1(c) of CSDR, ESMA is required to submit a report on internalised settlement to the Commission every two years. The most recent report is from 2020, with the result that there is no current information on the level of internalised settlement. Page 97 of 195 Study on consolidation and reducing fragmentation in trading and post-trading infrastructures in Europe 7.2

Target-2 Securities (T2S) T2S is a business application and technical platform developed and operated by the Eurosystem for securities settlement. The ECB, in close collaboration with CSDs and national central banks, launched the development of T2S as a response to the fragmented post-trade landscape in Europe, with the specific objective of addressing the complex, costly, and inefficient cross-border securities settlement that is a result of the diverse local systems and practices. The formal decision to build the platform was taken in July 2008. The Deutsche Bundesbank, Banque de France, Banca d’Italia, and Banco de España are responsible for the development and daily operation of the system. T2S provides a unified technical platform for intra- and inter-CSD settlement in central bank money. However, it does not alter the underlying legal relationships between CSDs and their clients, nor does it redefine the legal framework that governs ownership and transfer of securities –

these remain subject to the rules of each CSD and the applicable national law. As a result, when securities are transferred between accounts held in different CSDs, a formal link agreement is still necessary. This agreement defines the legal recognition of the cross-CSD transfer, the responsibilities of each CSD, and the operational framework. T2S merely executes the settlement instructions but does not substitute the legal infrastructure required to effect valid and enforceable cross-border transfers. (In order to change this, T2S would need to evolve into a legal infrastructure. This would significantly challenge the current role and autonomy of CSDs and probably would require regulatory restructuring of post-trade responsibilities, ultimately moving in the direction of transforming T2S into a single European CSD). CSDs are the gateways through which market participants access T2S services. Participants continue to contract with one or more CSDs for settlement across the accounts of

those CSDs of securities eligible for such settlement. Moreover, it is the CSDs – not market participants – that contract with the Eurosystem for T2S services. CSDs continue to provide services, particularly in relation to national requirements in areas such as registration, taxes, regulatory reporting, and some aspects of direct holdings by retail investors. Page 98 of 195 Study on consolidation and reducing fragmentation in trading and post-trading infrastructures in Europe Figure 45. Relationship of T2S and participating CSDs Source: Consultant analysis. Participants hold cash accounts with National Central Banks (NCBs) on the T2S platform and can link multiple securities accounts in different CSDs to a single cash account for each currency. Cash balances on T2S cash accounts are linked to cash accounts with the NCBs outside T2S, and cash moves between these accounts, including through the use of various auto-collateralisation processes. Participants transmit settlement

instructions to T2S either through their respective CSDs or, in the case of larger participants, by direct input. Matching may take place either outside T2S, with pre-matched instructions transmitted to T2S, or within the T2S matching engine. Roughly the same number of transactions are matched inside and outside T2S. All settlements take place on the T2S platform, and the results are transmitted back to participants either directly or through CSDs. T2S went live in 2015, and CSDs have chosen to migrate onto the platform in a series of waves. Currently, 24 CSDs from 23 European countries are connected to T2S. This includes the CSDs of all euro area countries except the corporate securities CSD in Greece. The two ICSDs are not yet in T2S While Euroclear Bank has signed the Framework Agreement and is committed to joining (but no migration date is known), Clearstream Luxembourg relies on the “one Clearstream” concept and the CBL-CBF setup 43. The main settlement currency is the euro,

but the Danish krone is also available. 43 Euroclear Bank signed the T2S Framework Agreement in December 2021 but has not yet Page 99 of 195 Study on consolidation and reducing fragmentation in trading and post-trading infrastructures in Europe The volume of settlement processed in T2S has risen with each successive wave of CSDs joining. In 2023, settlement volumes averaged 700,000 transactions daily with an average daily value of EUR 790 bn. This was equivalent to 75% of the number of transactions processed by T2S-participating CSDs and 50% of their value (based on data published by ECSDA). T2S is not capturing all the settlement activity of its participating CSDs, as it does not settle any non-euro transactions and some cross-border and other transactions. Figure 46. Volumes settled in T2S, mn of transactions, 2016-2023 Source: TARGET2-Securities Annual Report 2023. One of the objectives of T2S was that, by bringing all CSD accounts onto a single technical platform,

settlement between accounts in different CSDs would be simpler, making it easier for participants to consolidate their holdings in a single CSD. This has not happened, however: in 2023, cross-CSD settlement accounted for only 1.6% of total T2S settlement by volume and 35% by value This is expected to change, however, following the decision by Euronext Clearing to centralise its settlement accounts in Euronext Securities Milan, which has already resulted in an increased level of inter-CSD settlement. Some of the issues that contribute to the low inter-CSD volumes are: • Limited participation of ICSDs – however, Euroclear Bank is moving towards the use of T2S, as is Clearstream’s OneClearstream 44. • The cost of T2S can put some (smaller and/or non-euro) CSDs off joining, and others (non-euro CSDs) to limit their participation. The payback of significant upfront and ongoing fixed costs depends on volumes. For lowvolume CSDs, the unit cost per instruction can rise once these

charges are added, eroding the business case to migrate and encouraging them to keep their cheaper in-house systems. • Joining T2S for a non-Euro area CSD requires a commitment by the relevant NCB in relation to settling payments in the national currency. migrated its transactions to the platform, and no formal migration date has been publicly announced. 44 OneClearstream offers a single interface and log-on for the users of Clearstream Banking, Clearstream Frankfurt and LuxCSD. Page 100 of 195 Study on consolidation and reducing fragmentation in trading and post-trading infrastructures in Europe • While T2S harmonises settlement, corporate-law control of the share register preserves parallel CSD infrastructures even when the settlement leg runs on T2S. By design, corporate action processing, withholding tax relief, and SSI goldensource data are still run in bilateral (often bespoke) formats. Market participants gain only part of the scale benefit without these efficiencies

and have little commercial pressure to rationalise their existing custodial chains. Although T2S has made substantial progress since its implementation, significant additional harmonisation still needs to be completed, particularly in the areas of asset servicing and custody. Currently, it is not possible for an end-user to hold the same security through links to several CSDs, for example, to receive a French equity in Euroclear France, Euronext Securities Milan, and Clearstream Banking Frankfurt. This is an impediment to users potentially concentrating their settlement in one CSD and has constrained the use of CSD links. A forthcoming system enhancement will address this. T2S governance T2S is owned by the Eurosystem and operated by the central banks of France, Germany, Italy, and Spain. Ultimate responsibility rests with the Governing Council of the ECB, with day-to-day management carried out by the Market Infrastructure Board (MIB). The composition of the MIB is: • A chairperson

(ECB). • Nine members from Eurosystem central banks. • Two members from non-Euro area central banks using the Eurosystem infrastructure. • Two non-voting non-central bank members. The MIB is advised by an advisory group (AMI SeCo) and a number of technical and market groups. CSDs are not represented in T2S governance, although they are the direct users of the system, having outsourced key functions to T2S. This leaves them vulnerable to outages in the TARGET system, as happened in February 2025. At a minimum, to maintain the level of EU markets’ resilience, T2S should be subject to the same operational and risk requirements as CSDs. The cost of developing T2S was paid by the Eurosystem and is recovered according to principles laid down by the Governing Council. T2S fees are charged to participating CSDs on the basis of full cost recovery and equal prices for all CSDs, regardless of the volumes settled in T2S. In 2018, the Governing Council extended the cost recovery period to

the end of 2029 and, to ensure full cost Page 101 of 195 Study on consolidation and reducing fragmentation in trading and post-trading infrastructures in Europe recovery, increased the price of a standard DVP settlement from EUR 0.15 per side to EUR 0.195 plus a temporary surcharge of EUR 004, giving a cost of EUR 0.235 per side There are no charges for accounts or for securities balances Total fees charged to participating CSDs in 2023 (the latest available) amounted to EUR 121 mn. This fell short of covering the operating costs of EUR 133 mn (including EUR 40 mn for amortisation of the T2S platform). Table 18. T2S financial results (mn EUR) 2023 2022 Revenues 122.1 124.6 T2S fees charged to customers 120.7 123.7 Other income 1.4 0.9 Expenses (133.0) (117.8) Services provided by the 4CB (72.4) (70.9) Services provided by the ECB (4.5) (3.7) Amortisation of the T2S platform (39.2) (40.2) Interest charged by NCBs (16.8) (3.0) Net surplus/(deficit) (10.9)

6.8 Source: ECB (2024). 7.3 The fragmented infrastructure As seen above, the CSD infrastructure in the EU is fragmented. The causes of CSD fragmentation in Europe are numerous. Divergent national company and security laws Key factors that affect asset safekeeping are determined by national company law, which determines: • The definition of different types of security 45. • Definition of the ownership of a security. • Permitted structures of ownership, such as segregated and omnibus accounts. • Definition of the point of finality of settlement. • Whether, when, and how the identity of legal and/or beneficial owners is available to issuers. 45 Even in EU law there are nine definitions of “transferable securities” or “securities” spread across EU capital market legislation – Dybinski and Oplustil (2024). Page 102 of 195 Study on consolidation and reducing fragmentation in trading and post-trading infrastructures in Europe • The exercise of rights in

relation to corporate actions and participation in general meetings. • Tax law may impose different obligations on a CSD in relation to tax: • To calculate and/or collect financial transaction taxes. • To calculate and/or collect withholding taxes on income received by holders. • To calculate and/or collect capital gains taxes. There are two fundamentally different approaches to maintaining ownership records in the EU. While most of the EU CSDs and the ICSDs operate an omnibus (or intermediary) account structure, some markets (e.g, Nordic markets, Romania, the Czech Republic, and Cyprus) run an individually segregated (or beneficial owner) model. The two models embody different legal concepts of ownership and asset protection. This makes consolidation among CSDs operating differing account models complex and more expensive to achieve. Examples of divergent securities-related laws Definition of securities and legal nature of ownership: • In Germany, until two years ago,

securities were traditionally embodied in physical certificates or global notes, and legal ownership was based on possession or endorsement unless dematerialised. • In France, securities have been fully dematerialised since the late 1980s, and legal ownership is based on book-entry. • Romania requires full dematerialisation but maintains a strict notion of legal ownership at the level of the end-investor. Permitted account structures: • Most EU Member States permit omnibus account structures, where intermediaries hold securities on behalf of multiple clients (e.g, Luxembourg, Netherlands). • However, Nordic countries (e.g, Sweden, Finland) and Romania mandate individually segregated accounts at the CSD level, reflecting a different legal understanding of ownership and asset protection. Settlement finality: • The moment of legal finality of settlement (i.e, when transfer becomes irreversible) may vary based on national interpretations of the Settlement Finality Directive.

• For example, Italy defines finality based on the matching of instructions, while Germany aligns it with the actual book-entry in the CSD. Shareholder identification and corporate actions: • In Germany, issuers have extensive rights to identify shareholders, even beyond the CSD level. • In Italy, identification is possible, but it depends on the type of securities and requires coordination with intermediaries. • This diversity complicates corporate action processing across borders and deters consolidation. Page 103 of 195 Study on consolidation and reducing fragmentation in trading and post-trading infrastructures in Europe Legal and operational models of account segregation: • The divergence between beneficial owner and intermediate omnibus models creates legal and technological challenges. • Nordic markets (e.g, Sweden, Finland) require end-investor disclosure and register the legal title at the CSD level. This is aligned with a “transparent model” •

Central and Southern European markets largely permit omnibus models, where intermediaries (banks, brokers) hold legal title and maintain internal records. This “intermediated model” adds a layer of opacity and makes harmonised shareholder rights enforcement difficult. Withholding tax on income: • In Spain, the CSD plays a role in applying reduced treaty rates, and beneficiaries must often be pre-certified. • In Germany, the process requires a reclaim by the beneficial owner, unless they are directly identified. • These regimes are incompatible with omnibus holding models without an extensive reporting infrastructure. Financial Transaction Tax (FTT): • In France and Italy, the FTT must be collected by intermediaries (often via the CSD or clearing member) for qualifying trades. A non-domestic CSD may struggle to comply unless it establishes local infrastructure or partnerships. • This discourages the use of foreign CSDs for transactions involving FTT-liable securities.

Divergent regulation Prudential supervision remains with 27 NCAs with differing approaches, interpretations, and risk appetites. College of supervisors. Under the original 2014-CSDR the “college” concept applied only case-by-case: a host Member State could ask the home supervisor to set up a joint college when a single CSD had a material share of settlement in that host market (Art. 24) The oversight of groups owning multiple CSDs across different countries was fragmented, necessitating multiple concurrent yet distinct supervisory processes whenever there was a modification in the rule book, the introduction of a new service, or the outsourcing of an IT system. The CSDR-Refit (of 2024) allowed for establishing a college of supervisors, and a proposed revision was introduced (Article 24a) stipulating that the setting up of colleges should become mandatory under certain conditions. A college of supervisors should be established for CSDs, the activities of which are considered to be

of substantial importance for the functioning of the securities markets and the protection of investors in at least two host Member States. Art. 24a takes a step towards recognising corporate groups with more than one CSD by introducing the possibility for NCAs of group CSD member states (where Page 104 of 195 Study on consolidation and reducing fragmentation in trading and post-trading infrastructures in Europe the CSD has no substantial importance) to join (“upon their request”) the supervisory college (Art. 24a (5)) For cross-border CSD groups, this could be a simplification: one dossier, one set of information exchanges, no duplications. However, the college’s opinion is still advisory “without prejudice to the responsibilities of the competent authorities,” and CSDs of the same group, remaining separate legal entities, are still individually regulated in their home countries and supervised by the different local NCAs, limiting their ability to reap further financial

and operational benefits of a single supervisory authority. Market practices, operational & IT issues The low level of harmonisation in processing and messaging standards at CSDs increases participants’ costs. • Divergent internal cut-off times exist at various CSDs, even though T2S did accomplish a certain degree of harmonisation (at least among participant CSDs). • ISO15022/20022 is a widely used standard in communication; however, it can be implemented in various ways. Consequently, CSD participants must accommodate a variety of communication methods and standards. • Customised Standing Settlement Instructions (SSIs) are implemented at the level of individual CSDs, rather than being standardised across the broader market, which limits interoperability and contributes to fragmentation in cross-border settlement processes. • Shareholder transparency and registration, withholding tax procedures, and corporate actions processing are identified as the least harmonised areas

(even among T2S participating CSDs). Consequently, market participants who are members of multiple CSDs must establish their own internal systems to accommodate each CSD’s varying requirements. This results in additional expenses from both the operational and IT development perspectives, which the investors ultimately bear. This can be considered both a consequence and the perpetuator of fragmentation. The costly bespoke operational processes and IT interfaces developed due to the fragmentation, then become – in some sense – barriers to consolidation as they create real economic frictions that keep national settlement silos alive and slow down voluntary mergers or migrations. Eliminating those frictions – e.g, through a single EU implementation guide for ISO 20022, harmonised cut-offs, and a golden-source SSI/Corporate Action (CA) hub – would therefore attack a root cause of continuing fragmentation. Page 105 of 195 Study on consolidation and reducing fragmentation in

trading and post-trading infrastructures in Europe Market participants’ views on CSD fee schedules Do you face problems in relation to the complexity of fee schedules for CSDs 46. Number of respondents Source: Consultants’ survey of market participants. Full results in Annex 3 CSD participants consistently flag tariff complexity 47 and a low level of transparency as top pain points. Moreover, the tariff structures and relative weights of the different fee items differ widely among CSDs, making it very complicated and time-consuming to compare CSD fees. In total, the fee schedules of all EU CSDs are estimated to amount to close to 1,000 pages, a volume that underlines both the lack of standardisation and the clear, userfriendly disclosure of tariffs. Market participants’ views on the consequences of CSD consolidation Agreements and disagreements with statements on the consequences of CSD consolidation 48. Number of respondents Source: Consultants’ survey of market

participants. Full results in Annex 3 National interests Political resistance to losing control over the “financial market infrastructure of national interest” hinders further consolidation. As systemically important infrastructures, CSDs play an important role in the stability of the financial markets, and these national “assets” are protected even against the wider interests of the issuers and investors. 46 “No opinion” or “Don’t know” responses not shown. 47 The average European mainstream domestic CSD price list ranges from 89 fields to 219. 48 “No opinion” or “Don’t know” responses not shown. Page 106 of 195 Study on consolidation and reducing fragmentation in trading and post-trading infrastructures in Europe With some exceptions, CSDs are profit-making entities. The total revenue received by CSDs in 2023, that is, the cost to users, was over EUR 1 bn. The average European domestic CSD makes EUR 184 mn in annual income (net commission income,

interest income, other operating income, net income on financial operations) and makes a yearly profit of EUR 68 mn 49. Domestic CSDs depend on fees: they charge for their services through a combination of fees for opening and maintaining accounts, fees for transactions settled, fees related to the value of assets held, and fees for other services. For EU CSDs, safekeeping fees (based upon the value of assets under custody) are particularly significant proportionally, as they are still retained by the issuer CSD, in contrast to settlement fees, in the context of a more competitive and harmonised securities settlement landscape 50. The custody fee of the issuer CSD serves as the baseline cost for any investor CSD or custodian bank to maintain positions in and facilitate the settlement of securities issued in the issuer CSD. This applies not only to major issuer CSDs but also to smaller CSDs, with (relatively) significant assets under custody in foreign ownership (as opposed to trading

venues), even if stocks remain idle. The custody fees generated by a CSD are linked to the securities issued into that CSD. Although an investor can choose to hold securities in a CSD other than the one where they are issued, the custody fee it pays will never be lower, probably higher, than the fee charged by the issuer CSD. In principle, an issuer could make its securities more attractive to investors by issuing into a CSD with low custody fees. As discussed in Section 41, however, issuers have the legal right to issue into a CSD of their choice, but this right is in practice limited by variations in legal requirements and the inability of some CSDs to meet the requirements of an issuer from another jurisdiction. Thus, in many cases, a CSD has an effective monopoly for the issuers in its country. Harmonising the legal frameworks would make the issuers’ freedom of choice a reality. Some market participants have proposed the idea of a common issuance utility to create a single

marketplace for CSDs’ safekeeping and settlement services. A more detailed proposal is expected to be available later in 2025. 49 This is based on preliminary information from a survey being carried out by Value Exchange on behalf of AFME, to be published later in 2025. 50 While it has proven difficult to combine safekeeping services across national borders, the settlement process is less differentiated and T2S provides a single platform for settlement across multiple markets with almost complete harmonisation of the processes required to support settlement. Critically, however, safekeeping remains the responsibility of the national CSDs (even in case of T2S connected CSDs). Page 107 of 195 Study on consolidation and reducing fragmentation in trading and post-trading infrastructures in Europe 7.4 But (why) does this matter? Inefficiency in hard numbers It is a scale business. The result of the above is a large number of CSDs with limited competition, where many operate below

an efficient scale. Economies of scale are significant for CSDs. Using average revenue per transaction settled as a measure of unit cost, it can be seen that there is a wide range between the smallest and largest CSDs in Europe 51. (T2S is not shown separately, as CSD revenues include T2S costs that are passed on. ICSDs are not included as part of their business is outside Europe.) DTC in the US achieves a significantly lower unit cost than any European CSD, on the basis of significantly higher volumes. Figure 47. Economies of scale in CSDs (2023) Source: ECSDA database, annual reports of DTC, DTCC, and FRB. Statistical Note: securities settlement systems operated by NCBs in Europe are not included, as, unlike the FRB and ECB, they do not disclose the costs and revenues of the securities settlement systems they operate. Cost comparison across the Atlantic 52 In comparing the US and Canadian CSDs with major European CSDs, Europe’s largest domestic CSDs still earn the bulk of their

revenue from Assets under Custody (AuC) fees, not from transaction activity. With only one or two exceptions, AuC charges account for roughly half – and in some markets up to 80 % – of total fee income. In contrast, North American CSDs rely mainly on activity-based pricing. This reflects the fact that there is practically no competition in Europe in issuer CSD activity, and as such, the driver of such 51 Revenue per transaction is, admittedly, a crude measure, as it does not take account of the range of services provided by different CSDs. Higher revenue per transaction may indicate the provision of more value-added services. However, the general pattern of increasing economies to scale is unlikely to be affected. 52 This is based on preliminary information from a survey being carried out by Value Exchange on behalf of AFME, to be published later in 2025. Page 108 of 195 Study on consolidation and reducing fragmentation in trading and post-trading infrastructures in Europe

safekeeping fees is the custody volume. (In North America, the safekeeping fee driver is the number of security lines rather than the value of assets.) The cost impact is stark. On an “all-in” custody basis, investors pay an average of about 0.026 bp at the largest European CSDs versus 0004 bp at their North American peers – a 6.5-fold difference Settlement costs are somewhat closer but still unfavourable: the average total settlement cost to a CSD client is EUR 0.53 per transaction in Europe versus EUR 0.25 in North America Roughly EUR 010 of the average European settlement figure is a pass-through of T2S charges. Fixed items amplify the spread. Membership and connectivity fees consume just over 8% of the average European CSD invoice (≈1.4% membership, 72% communications), and at some venues these non-volume-based charges approach 20 % of a client’s total bill. The investor perspective. Fragmentation at the CSD level results in increased and persistent costs for

end-investors. Each additional intermediary - local agent bank, sub-custodian, issuer CSD – imposes its own fees for asset custody, connection, and cash management. Most European CSDs primarily charge based on AuC rather than transactional activity, resulting in investors incurring costs (at issuer CSDs) even while their portfolios remain inactive (or settled in other venues). This has negative operational consequences. A single cross-border transaction may necessitate re-entry across multiple entities, multiple static data repositories; discrepancies result in "unmatched/late" status and incur CSDR penalties to investors. Relief-at-source for withholding tax is typically associated with domestic paying agents and exists in 27 country variations; omnibus account structures hide the beneficial owner, resulting in prolonged manual reclaim processes, often lasting months or even years. Moving to T+1 in Europe – the challenges ahead A recent report, “Tackling Post-Trade

Friction: Supporting a Global Shortened Settlement Cycle,” pointed to the complexity of Europe’s move to T+1 (expected to take place in October 2027), as a result of a high number of markets, regulators, and FMIs 53. “Not only are there more currencies, market infrastructures, market participants, and regulators involved, but there are also significantly different market practices to accommodate”. 54 53 Firebrand Research, 2025. 54 ibid. Page 109 of 195 Study on consolidation and reducing fragmentation in trading and post-trading infrastructures in Europe The report, based on interviews with market practitioners, concludes that, due to market differences across the region, the move to T+1 in Europe is expected to be more complex and costly than it was for North America. According to the report, large global custodians could spend up to USD 36 million each transitioning from T+2 to T+1 settlement in Europe, and even small-sized asset managers are expected to spend USD

223,000. By contrast, the advisory firm estimates that it costs USD 13.3 million for a global custodian to carry out T+1 projects in North America and USD 148,750 for a small asset manager. Interviewees’ greatest concerns about the European move to T+1 relate to a potential misalignment in implementation across the region, foreign exchange misalignment, Place of Settlement matching, and incorrect SSIs. 7.5 Case studies and what we can learn from them The following six case studies present examples of developments that have been undertaken to streamline the number of CSD infrastructures in Europe. 7.51 Case study 1: Euroclear ESES markets – closer alignment of 3 CSDs When Euronext merged the Belgian, French, and Dutch exchanges (2000), posttrade remained national: a cross-border settlement among the three markets typically cost 10-12 times that of the domestic transactions. Euroclear Group’s answer was first to build a Single Settlement Engine (SSE), which was launched in

Euroclear France in 2006. The SSE would perform the core function of securities settlement, and the plan was to consolidate all IT systems within the Euroclear group to the new SSE. (As it turned out, Euroclear later abandoned this plan partly because harmonising markets sufficiently proved very hard to accomplish, and thus, the Swedish and Finnish CSDs were never migrated to the SSE.) The next step in Euroclear’s migration was to launch a common “platform” in Euroclear France, Euroclear Belgium, and Euroclear Nederland called ESES Euroclear Settlement for Euronext-zone Securities in 2009. Using the SSE as its foundation, ESES serves as a single processing solution to process both domestic and cross-border fixed-income and equity transactions in the Belgian, Dutch, and French markets as if they were a single market. The creation of ESES was significant because it was the first time market participants in three EU markets could use the same platform to process domestic

transactions. It also meant that cross-border transactions between counterparties Page 110 of 195 Study on consolidation and reducing fragmentation in trading and post-trading infrastructures in Europe in France, Belgium, and the Netherlands were processed as domestic transactions at domestic settlement prices. ESES – by harmonising settlement – was key to delivering the full benefits of the Euronext Single Order Book for equities in the three exchanges (Paris, Brussels, and Amsterdam). All three ESES CSDs joined T2S in September 2016 (Wave 3), moving cash settlement to ECB central-bank money. The current operational model is characterised by: • Shared IT/single technical platform, single interface. One matching and settlement engine processes all equity, bond, and fund trades for the three markets; clients connect through the same SWIFT and file formats. • Still three legally separate CSDs. Each entity has its own rule book, company-law “issuer CSD” role, and local

central bank money account. Each CSD requires its own local governance structure, although ESES CSDs streamlined their governance in 2009: while each CSD retained its own board and management structure, they aligned the membership composition. • The CSDs are individually regulated and supervised in their home countries. Thus, any changes to the technical infrastructure require approval from all the national regulators. • ESES tariffs are harmonised across the CSDs. From day one, a French counterparty settling against a Dutch counterparty paid the same fee as a domestic French trade – a first in the EU. Additional tariffs for CSD-specific services are kept. What can we learn from this case? A shared technical platform can be an enabler to reduce cross-border tariffs in the ESES CSDs significantly. However, a “platform only” model – without corporate-law harmonisation and a single CSD – will never be able to deliver the full potential gains. The group supervisory college

framework should be in place as soon as possible to replace the requirement for three NCAs to sign off on the same regulations, risk models, etc., for the same engine 7.52 Case study 2: Baltic CSD – one legal entity to cover four countries, with local branch operations NASDAQ CSD is a cross-border central securities depository operating in Latvia, Lithuania, Estonia, and Iceland. The consolidation process began with the merger of the three Baltic CSDs into a single legal entity, NASDAQ CSD SE, on 18 September 2017, headquartered in Latvia. This was followed by the inclusion of Page 111 of 195 Study on consolidation and reducing fragmentation in trading and post-trading infrastructures in Europe Iceland in 2020, when the Icelandic securities settlement system was migrated onto the consolidated platform. While operations were unified on a single IT platform and processes centralised, each country retained a local branch, maintaining compliance with its national legal and

regulatory frameworks. The primary goal of the consolidation was to reduce duplication in IT, compliance, and operations while strengthening the region’s position in the European capital market infrastructure. However, the consolidation also faced structural and regulatory barriers that limited the full realisation of its potential. Current setup: • Legal structure: NASDAQ CSD is the single legal entity, with branches operating in Estonia, Lithuania, and Iceland. • Operational model: While a single IT platform supports all operations, four legally distinct Securities Settlement Systems exist, each governed by its national law. • Supervision: The Bank of Latvia is the home supervisor, though cooperation with other national authorities is required. • Taxation: Taxes are paid in each country where the branches operate, in line with local legislation. Insights from stakeholders: • Efficiency and fragmentation: NASDAQ estimates that around 80% of the originally targeted

consolidation value has been captured. However, regulatory fragmentation continues to generate compliance duplication. A more harmonised regulatory environment could result in further efficiencies, reducing costs by 10-50% from current levels. • Local relevance: Branches retain local staff for client service and legal compliance. Interfaces in local languages are maintained, even as operational consolidation advances. • Strategic structure design: The branch-based structure enables NASDAQ CSD to avoid regulatory outsourcing requirements that would apply to a multi-entity model, enhancing governance efficiency and reducing overhead. Overall, the NASDAQ CSD consolidation has achieved its core financial objective: driving cost efficiency through operational integration. The improved profitability and sustained efficiency gains show that the consolidation has strengthened both scale and resilience. Unlocking the remaining value will require progress in regulatory harmonisation and

cross-border investor access, areas where EU-wide reform could have a significant impact. What can we learn from this case? The NASDAQ CSD case shows corporate consolidation can deliver significant and quick wins, without closing off national or local operations. Merging the three Page 112 of 195 Study on consolidation and reducing fragmentation in trading and post-trading infrastructures in Europe Baltic CSDs (and later Iceland) into one legal entity cut IT, operations, and governance costs enough to push the cost-to-income ratio from 0.88 to 062 in five years. The model shows that even small markets can harvest scale economies while keeping local “shop-front” branches for client support and compliance. On the other hand, as each national branch still runs a legally distinct Securities Settlement System under its own company law, tax, and corporate action rules, NASDAQ CSD must maintain four sets of rule manuals and parallel compliance files. The case illustrates how

fragmented national company law, not technology, is now the main brake on realising further efficiencies. The case shows the issues typical for smaller markets: limited connectivity with Euroclear and partial links to Clearstream still deter international funds at IPOs. CMU/SIU reform proposals addressing regional hubs will leave liquidity on the table unless they also mandate – or at least incentivise – links to the EU’s largest investor (I)CSDs. A single legal entity and a single supervisory authority (Bank of Latvia) offer numerous advantages compared to multi-entity groups defined by multiple equal supervisors. This highlights the necessity of the new CSDR group-college framework and a strengthened ESMA to maintain uniform risk management as cross-border CSD mergers increase. 7.53 Case study 3: Ireland, a Member State without its own national CSD There is one example in Europe where a country does not have a national CSD but outsources settlement to another CSD: settlement

for the Irish market takes place in Euroclear Bank (EB). Due to the close historic links between the Dublin and London Exchanges, Irish equities (and ETFs) were settled through TALISMAN, the London Stock Exchange’s electronic/book-entry system that handled most UK and Irish equities. When CREST replaced TALISMAN, settlement of Irish equities was routed to the CREST system from the moment it went live in October 1996. (Irish Government debt and corporate debt securities settled in Euroclear Bank Belgium.) As both the UK and Ireland have a “name on register” model for securities ownership, Euroclear UK & Ireland (EUI) was a single technical platform operating under two legal regimes: Irish equities settled under Irish law and UK securities settled under UK law. Users of the system in both the UK and Ireland automatically had access to all UK and Irish securities and could settle with counterparties in either country. As a result of Brexit, however, the UK became a “third

country”; thus, CREST would have needed CSDR third-country recognition, something the market Page 113 of 195 Study on consolidation and reducing fragmentation in trading and post-trading infrastructures in Europe feared might lapse or impose extra frictions. In 2018, an industry task force backed by the Central Bank of Ireland and Euronext Dublin chose Euroclear Bank to replace CREST as the issuer CSD and transfer the settlement of trades in Irish equities and other exchange-traded instruments from the UK operation to EB. The move required adaptation by Irish issuing companies to a different ownership structure of the Belgian law: as EB operates under Belgian law and securities are kept on omnibus accounts, Irish issuers had to migrate from a “name-on-register” model to Belgian account-based ownership. The Migration of Participating Securities Act 2019 established a statutory mechanism in which issuers could pass a special shareholders’ resolution regarding the migration

of their securities from EUI to EB, with all uncertificated shares "deemed" to be Belgian-law rights inside EB while remaining Irish-law securities for all other purposes. Fifty listed companies (plus ETFs and closed-end funds) completed the bulk migration over the weekend of March 13-15, 2021; the first trades in Euronext Dublin settled successfully in EB on March 17. The settlement model of Irish securities within EB: • Irish shares are still constituted under Irish law, but settlement finality is achieved, and securities accounts are under Belgian law and EB’s rule book. • Investors now settle in commercial-bank money inside EB; a T2S-based, central-bank-money option will follow once EB’s phased T2S migration for equities is finished (target 2026). • Irish registrars maintain an auxiliary Irish register fed by position statements from EB; shareholder rights (voting, dividends) flow through EB’s omnibus chain. • Irish shareholders have the right to withdraw

their holdings from EB’s omnibus account into their own names on the issuer’s register. What can we learn from this case? The Irish case study shows clearly that an EU market can outsource its issuer CSD to another Member State while maintaining compliance with domestic company law. The case also demonstrates that omnibus versus beneficial owner “mismatches” can be solved but requires bespoke legislation and changes to corporate by-laws. Again, this underlines the barriers imposed by divergent European company law regimes. Page 114 of 195 Study on consolidation and reducing fragmentation in trading and post-trading infrastructures in Europe 7.54 Case study 4: Greece-Cyprus, a shared platform without corporate consolidation In 2002, a Memorandum of Understanding was signed among the Athens Exchange, the Derivatives Exchange, and the Cyprus Stock Exchange, officially formalising the cooperation that had existed between the stock exchanges since the establishment of the

Cyprus Stock Exchange in 1996. On the trading level, a Common Platform was introduced in 2006 as a consequence of this collaboration. The same trading system is used in both the Athex and the Cyprus Stock Exchange. It is the same trading system, but it works for two different markets and operates two different order books. There is also a commercial arrangement between Greece and Cyprus: the fees for any trade carried out on Athex by a Cypriot member are shared equally between the two exchanges. This Common Platform thus entails the shared use of trading infrastructure and operational rules; the two rule books are totally harmonised. This approach capitalises on synergies, achieves economies of scale, and ultimately fosters the mutual growth of both exchanges. The Platform is designed to drive the development of both markets. This also enhances the efficiency of the traders’ community: the trading infrastructure and API are identical across the two markets, despite the fact that two

distinct memberships are necessary. The two exchanges have a very close and good relationship. The Athens Exchange Group offers the CSE a comprehensive suite of services, ranging from providing IT systems and infrastructure to operational support and business development initiatives. On the settlement layer, Cyprus has had a single CSD (the Central Depository and Central Registry, CDCR) since 2001. It operates as a department of the Cyprus Stock Exchange (CSE). The CDCR is responsible for clearing and settling CSE transactions, administrating the Dematerialised Securities System (SAT), and the central registry in Cyprus. CDCR outsources its system operations, and Athex Group has provided the CSD system (OASIS and SAT) for the Cypriot CSD since 2013. Both systems are replicas of the respective Greek systems. Cyprus remains the legal issuer CSD for domestic securities, yet virtually every core operational task – trade matching, settlement in central-bank money, corporate-action

messaging, and investor CSD links – runs on systems hosted and supervised by ATHEXCSD in Athens. This solution ensures more efficient operations for CSD participants. Operating one data centre and one disaster-recovery site cuts fixed overheads. The Cypriot market's overall cyber-resilience rating has aligned with ATHEXCSD’s ISO-certified security framework. Page 115 of 195 Study on consolidation and reducing fragmentation in trading and post-trading infrastructures in Europe However, underlying securities laws, regulatory issues, taxation, requirements towards issuers and investors, corporate actions management, general market models, and arrangements remain distinct. These burdens, among other factors, obstruct the potential merger of the Greek and Cypriot CSDs into a single legal entity. What can we learn from this case? The Greece-Cyprus case study shows that technology sharing works without a legal merger. Running a single trading engine, a single CSD software

solution, and shared data centres delivers economies of obvious scale for two mediumsized markets. Cyprus enjoys lower fixed IT overhead costs and a higher cyberresilience rating, while Athens monetises its platform investment For participants, the use of common APIs lowers costs. However, because Greek and Cypriot corporate securities law, tax rules, and supervisory practices remain different, the arrangement still requires two separate memberships, two order books, and parallel issuer-CSD roles. Liquidity remains shallower and spreads wider than it would in a fully merged market. This case study shows that shared infrastructure can cut costs and raise resilience, but without deeper legal harmonisation, it stops short of the liquidity and competitiveness gains the CMU/SIU seeks. Initiatives in the pipeline are described in case studies below: The Euronext initiative Following an earlier shift of cash-equity clearing into Euronext Clearing, Euronext’s recent announcement sets out an

ambitious post-trade overhaul: by September 2026 all equity and euro-denominated ETF trades executed on the Amsterdam, Brussels and Paris exchanges will settle at Euronext Securities Milan (ESM, the former Monte Titoli) – joining the Lisbon, Milan and Oslo markets that are already on that platform. This initiative will establish a vertically integrated group across six markets. Clients will expect to deal with a single CSD rulebook, one cut-off timetable, a unified onboarding flow, and a single fee schedule with T2S central bank money settlement and finality across six markets. Euronext argues that this will enable intermediaries to consolidate settlement and custody activities within a single CSD, thereby facilitating the transition to the EU-wide T+1 settlement cycle in 2027. Beyond the obvious benefits of economies of scale, lower fees, harmonised processes, and a larger, more concentrated pool of liquidity, the plan has potential drawbacks: Page 116 of 195 Study on

consolidation and reducing fragmentation in trading and post-trading infrastructures in Europe • Legal differences of the markets – e.g, different shareholder ID rules and tax • • • • • forms – will remain, meaning some of the hoped-for savings may not materialise. Participants now settling via Euroclear France/Netherlands/Belgium must open new links to ESM, incurring costs and legal work. While exchange settlement might move to ESM, the issuer CSDs will remain the ESES CSDs, probably requiring continuous repositioning of securities. The plan requires political buy-in from Member States whose CSDs are being bypassed. The individual NCAs may resist the loss of supervisory power and local fee revenue. Concentrating settlement of a very substantial part of Europe’s lit equity flow in one CSD also creates a single point of operational failure and cyber risk. It remains unclear whether the settlement of trades in these securities executed on other trading venues and

cleared through other CCPs will also move to ESM or remain in national CSDs, potentially splitting settlement liquidity. The CSEE initiative In contrast to other regions of Europe where integration and cooperation have evolved in various forms over recent decades, Central and South-Eastern Europe (CSEE) markets have not advanced similarly, with the few attempts largely proving unsuccessful (e.g, CEESEG, SEE Link) Equity markets in these countries are characterised by small scale and low free float levels of listed companies. IPOs and the liquidity of listed companies are, in many cases, too small to attract institutional investors, especially foreign ones. With the support of several regional Stock Exchanges, EBRD started a project to enhance the collaboration of capital market infrastructures in the fragmented CSEE region, consequently fostering regional capital market and economic development. The project originally involved 8 stock exchanges from Bulgaria, Croatia, Greece,

Hungary, Poland, Romania, Slovakia, and Slovenia. The project’s goal was to find the best way to bring together regional markets. A possible integration would, in addition to efficiency considerations, draw the attention of (local and international) investors to the regional markets, provide issuers with access to a better and larger capital pool, and facilitate joint product development. On 13 Nov 2024, the stock exchanges of participating countries and, in December 2024, Skopje signed an EBRD-brokered Memorandum of Understanding (MoU). As a next step, the participating exchanges agreed to establish a new company “to oversee and coordinate the integration of capital market infrastructures across Central and Southeastern Europe” in June 2025. The Ministries of Finance signed an MoU in August 2025, confirming their commitment to work collectively, jointly with market operators, to remove Page 117 of 195 Study on consolidation and reducing fragmentation in trading and

post-trading infrastructures in Europe barriers to cross-border activity and strengthen integration of the regional capital markets infrastructure. Such a jointly owned and managed Company could (i) harmonise membership requirements, (ii) develop a technical solution that would group orders received by different national exchanges into a single pool, (iii) initiate the selection of a single trading system, and (iv) operate as a single regional brand for the participating markets. Beyond integrating trading, solutions are also required for clearing and settling transactions. Regarding settlement, the national CSDs of the participating countries would have to (i) establish bilateral account relationships with each other or (ii) one CSD could assume the intermediary, central role, and the other CSDs could act as “branches.” If implemented, the CSEE plan would represent the first multi-market trading and post-trading consolidation in the EU since ESES and the Baltic Nasdaq CSD,

perhaps demonstrating a solution rooted in regional collaboration. Regional pooling may prove more feasible than EU-wide "super-solutions." 7.6 Digital infrastructure – High-level impact analysis It has become clear during the interview process for this research that the issue of emerging technologies, particularly the implementation of Distributed Ledger Technology (DLT), is perceived as a potential solution to fragmentation in capital markets and the inefficiencies this creates. It is equally true that a detailed analysis of how digital infrastructures in the future will impact fragmentation cannot be completed within the time and resources available to this study and should be the subject of its own research project. However, a number of observations can be made based on the research conducted by the authors of this report: • Today, many initiatives are being undertaken to create digital infrastructure to replace traditional infrastructures such as Exchanges, CCPs,

and CSDs. However, these are largely digital recreations of the infrastructures that exist today. Linkages will inevitably be required between traditional and digital infrastructures, as a cliff-edge replacement is not feasible. • Current digital infrastructure developments tend to be focused on securing regulatory approval and protecting IP. They are often more siloed than the legacy infrastructure they seek to compete with or replace, and as such, interoperability with these other existing or developing solutions is not a priority. Such interoperability will be required between digital infrastructures and between traditional and digital infrastructures. Page 118 of 195 Study on consolidation and reducing fragmentation in trading and post-trading infrastructures in Europe • A complete digital infrastructure solution will require a compatible digital cash solution for use in trading and settlement, most likely in central bank money if current guidelines are to be respected.

This will require a link between the transfer of a Central Bank Digital Currency (CBDC) and a transfer of a digital security, but only if current models are used. • Traditional instruments are supported by an established, albeit fragmented, legal infrastructure concerning security interests, collateralisation, and insolvency. There is no comprehensive equivalent for digital assets It is important to distinguish between: • Tokenised securities, which are DLT-based tokens representing securities that exist outside a blockchain; and • DLT securities are “native” to the blockchain and do not exist in any other form. At present, almost all DLT security issuance has been for fixed income. Issuance took off in 2024, with EUR 3 bn issued, of which EUR 1.8 bn was issued as part of trials run by the ECB and Swiss National Bank. By comparison, issuance of tokenised securities has been smaller: it is estimated that some EUR 2 bn of tokenised assets were outstanding at end-2024, of which

the majority were US money market funds. There is no doubt that the direction of travel is towards digital markets to increase efficiency, reduce cost, and democratise investment. The change in demographics towards a younger community demanding an accessible investment market is both happening today and is necessary to support the future growth of the EU economies. In addition to the above short-term observations, the more long-term conclusion is that the form of future capital markets remains largely undefined, save for efforts to recreate the current infrastructures in digital form. Whilst trading, clearing, and depositary functions will likely be required, it is unclear whether exchanges, CCPs, and CSDs in their current form represent the solution. More work, in parallel with efforts to digitise the existing flows, is required to design future capital markets. 7.61 Trials Two public sector digital trials, one operated by the ECB and the other by NCAs, co-ordinated by ESMA, are

currently underway in the EU. Page 119 of 195 Study on consolidation and reducing fragmentation in trading and post-trading infrastructures in Europe ECB Trials The ECB is testing two DLT settlement solutions: • Pontes (short-term): An interoperable tool to settle DLT transactions with central bank money by the end of Q3 2026. • Appia (long-term): A wholesale CBDC-based solution for broader integration and cross-border payments. The results of the trials in 2024 are: • 64 participants settled EUR 1.59 bn across more than 200 DLT transactions. • Results showed high demand for settlement in central bank money, benefits in automation, and potential to reduce market fragmentation. • Challenges remain in the form of legal and technical complexity, lack of standardisation, and regulatory hurdles. DLT Pilot Regime The DLT Pilot Regime started in March 2023 to test DLT under flexible regulatory rules in real-world conditions. It allows approved DLT platforms limited exemptions

from MiFID II and CSDR. The challenges it faces are: • Only 4 participants were approved by July 2025. • A complex application process deters smaller firms. Issues include the limited scope of eligible assets, concerns about the time-bound nature of the sandbox, and the permanency of the regime beyond that. In June 2025, ESMA recommended 55, in the short term, to simplify rules and enhance investor protection, and in the long term, to move toward a permanent, risk-based DLT regulatory framework. 7.62 Regulation Supporting DLT The principal regulation supporting DLT activities in the EU is the Markets in Crypto-Assets Regulation (MiCA). It applies EU-wide from 30 December 2024 (with full transition by July 2026) and regulates multiple categories of crypto assets such as e-money tokens, asset-referenced tokens, other crypto-assets, and crypto service providers. 55 ESMA Report on the Functioning and Review of the DLT Pilot Regime, 2025. Page 120 of 195 Study on

consolidation and reducing fragmentation in trading and post-trading infrastructures in Europe The ongoing challenges it faces include: • High complexity and licensing costs. • Regulatory ambiguities, especially for multi-issuer stablecoins 56. • Risk of overlap between MiCA and PSD2 in regulating EMTs. Other Regulations that indirectly support digitalisation include the Digital Operational Resilience Act (DORA), which covers operational resilience, and the Financial Data Access Regulation (FiDA), which supports financial data access and integration. 7.63 Conclusions and recommendations on DLT These trials aim to understand the role that technology can play in the capital markets of the future, but a number of hurdles remain to defining the interaction of participants and infrastructures in a way in which the risks are appropriately identified and managed. Our preliminary recommendations that will underpin the development of a successful digital solution are: • Accelerate

standardisation by defining and promoting EU-wide standards for DLT interoperability together with the legal definitions to support crossplatform operations. This is best achieved through regulatory intervention • Simplify regulatory entry by streamlining the DLT Pilot Regime approval process to encourage participation, including from smaller innovators, some of whom may not have achieved market visibility yet. • Clarify MiCA-PSD2 overlaps by, for example, resolving the dual licensing issues for e-money tokens. • Promote tokenisation by encouraging infrastructure-level innovation in digital asset issuance, trading, and post-trade processing. • Build interoperable bridges by prioritising projects like Pontes and Appia. These ensure seamless interaction between traditional systems and DLT within the Eurosystem (Pontes) and between the Eurosystem and other jurisdictions (Pontes). • Monitor and adjust by using lessons learned from the pilot programmes and SIU consultations to

inform adaptive, permanent regulation. 7.7 Settlement and safekeeping: conclusions Deposits of securities in CSDs, followed by safekeeping and settlement, are the foundation of the capital markets. Fragmentation at this level creates fractures 56 BANCA D’ITALIA - Stablecoins in the Payments Ecosystem: Reflections on Responsible Innovation. Page 121 of 195 Study on consolidation and reducing fragmentation in trading and post-trading infrastructures in Europe throughout the system but follows inevitably from the divergences in national laws on securities. This legal fragmentation: • Sets up barriers to the closer integration of CSDs, even when under common ownership. • Restricts investors’ ability to concentrate holdings in one or a small number of CSDs, even where links exist. • Even though legal rights exist, they restrict issuers’ ability to issue into the CSD of their choice. • Protects the existence of CSDs below the economic scale, as they have a local

monopoly, adding to the overall cost of the infrastructure. • Limits the effectiveness of T2S in providing a framework of interoperability. Without reforming these legal divergences, other measures, such as harmonising market practices and developing CSD links, will be of limited benefit. The only effective measure is harmonisation of the legal and tax framework, which opens the way to consolidation to reduce the number of CSDs, following some of the models identified in the case studies, and competition to give issuers and investors a choice. The goal is the development of effective interoperability between a small number of CSDs – analogous to the interoperability model between CCPs – that enables each market participant to concentrate its safekeeping and settlement in the CSD of its choice, independently of the choices made by its counterparties, with settlement flowing across the links between the CSDs, supported by T2S. DLT and tokenisation do not offer an immediate solution

but do offer opportunities in the long term. A strategic design project should be undertaken to understand the most effective form of future markets, exactly what digital infrastructure is necessary, and how appropriate regulatory and legal regimes can support this. Page 122 of 195 Study on consolidation and reducing fragmentation in trading and post-trading infrastructures in Europe Market participants’ views on the way forward for settlement Preferred direction for the development of settlement for European Securities 57. Number of respondents What is the ideal number of Securities CSDs in Europe (incl. Norway, Switzerland, and the UK) 58. Number of respondents Source: Consultants’ survey of market participants. Full results in Annex 3 57 “No opinion” or “Don’t know” responses not shown. 58 “No opinion” or “Don’t know” responses not shown. Page 123 of 195 Study on consolidation and reducing fragmentation in trading and post-trading infrastructures

in Europe 8. Issues in the supervisory and regulatory structure The supervision of EU capital markets is carried out by a combination of European Supervisory Authorities (ESAs) and NCAs. Table 19. Mapping of EU Legislation in the area of supervision of the EU Capital Markets. Legal Instrument ESMA-Regulation (EU) No.1095/2010 ESA Review Regulation (EU) 2019/2175 MiFID II Markets in Financial Instruments Directive (EU) 2014/65/EU MiFIR Markets in Financial Instruments Regulation (EU) No 600/2014 Area of Regulation Objective / Scope Remarks / Status Establishment, powers, and tasks of ESMA Ensure consistent and effective supervision and coordination among NCAs; develop technical standards; contribute to supervisory convergence Foundational act for the European Securities and Markets Authority (ESMA); amended by the ESA Review Regulation (EU) 2019/2175 Review of the ESAs’ structure and powers Strengthen the role of ESAs in direct supervision and convergence; enhance

ESMA’s role in market data supervision and CCPs Amended ESMA Regulation and other ESA founding regulations Powers and obligations of NCAs; coordination with ESMA Ensure supervision of trading venues and investment firms; ESMA guidelines and Q&As support convergence Coherent with MiFIR and ESMA role Data reporting services supervision; supervisory coordination of trading venues Empower ESMA to supervise consolidated tape providers (CTPs) and coordinate with NCAs Revised by the Listing Act (Regulation (EU) 2024/2809) EMIR European Market Infrastructure Regulation (EU) No 648/2012 Supervision of CCPs; supervisory colleges Establish supervisory colleges for CCPs; ESMA coordination role Revised by EMIR 2.2 and EMIR Refit (Regulation (EU) 2019/834) EMIR 3.0 proposal expands ESMA’s role CSDR Supervision of CSDs NCAs supervise CSDs; ESMA has coordination and mediation powers Amended by CSDR Refit – Regulation (EU) 2023/2845 CCP Recovery and Resolution Regulation (EU)

2021/23 Resolution authorities and ESMA’s role Define resolution planning and intervention tools; ESMA participates in resolution colleges Applies to CCPs since 2022 Market Abuse Regulation (EU) No 596/2014 (MAR) Cooperation among NCAs and ESMA Ensure coordinated enforcement of market abuse rules ESMA issues guidelines and opinions to foster harmonised enforcement Central Securities Depositories Regulation (EU) No 909/2014 Page 124 of 195 Study on consolidation and reducing fragmentation in trading and post-trading infrastructures in Europe Legal Instrument Area of Regulation Prospectus Regulation (EU) 2017/1129 Supervision of prospectuses; ESMA technical standards Objective / Scope Remarks / Status Ensure quality and comparability of prospectus documentation; ESMA supports harmonisation Amended by the Listing Act Source: Consultant analysis. The key EU authority for capital markets is ESMA. While national supervisory authorities are responsible for supervising

individual entities, ESMA works on harmonising financial supervision by developing a single rulebook and promoting the consistent application of the rulebook to create a level playing field. ESMA is a direct supervisor of multiple infrastructures, including, for example, credit rating agencies, systemically important third-country CCPs, securitisation repositories, and trade repositories. ESMA either has or will take over additional responsibilities, including the supervision of critical benchmarks, data service providers, and third-country firms in a number of different areas. It works with other ESAs and the ECB in the European Systemic Risk Board. European System of Financial Supervision (ESFS) The European System of Financial Supervision (ESFS) is the institutional architecture created in the aftermath of the 2008 financial crisis to ensure consistent and effective financial supervision across the EU. Operational since 2011, the ESFS is a networked structure combining national and

EU-level supervisory bodies with the aim of safeguarding financial stability, strengthening coordination, and improving the functioning of the internal market. The ESFS consists of the following components: • • • • • • National Competent Authorities. European Banking Authority (EBA). European Securities and Markets Authority (ESMA). European Insurance and Occupational Pensions Authority (EIOPA). The Joint Committee of the European Supervisory Authorities (ESAs). the European Systemic Risk Board. These European supervisory authorities develop binding technical standards, issue guidelines and recommendations, and mediate disputes between national supervisors. ESMA plays a central role in regulating and supervising EU capital markets, including post-trade infrastructure (CSDs and CCPs) and consolidated tape providers under CSDR, EMIR, and MiFIR. Supervisory powers of the ESA were subject to the Commission’s 2017 ESAs review 59. 59 Moloney (2023). Page 125 of 195 Study

on consolidation and reducing fragmentation in trading and post-trading infrastructures in Europe The ESMA Board of Supervisors includes the heads of the NCAs and non-voting representatives of the other ESAs and the EC. A separate CCP Supervisory Committee (CCPSC) reports to the ESMA Board of Supervisors. Through a number of Standing Committees, ESMA develops policy and promotes supervisory convergence. Thus, supervision of capital market infrastructures in the EU is based on national and EU legislation. In most cases, direct supervision is carried out by NCAs, though it has a larger role for ESMA in the case of CCPs through the CCPSC. The application of the relevant EU legislation is generally guided by guidance from ESMA, but there is often significant divergence, either because of differing interpretations or the need to meet the requirements of national laws. These differences in application of the law create difficulties for market infrastructures and market participants as they

face the need to comply with different rules in different jurisdictions or face an uneven playing field. The same challenge concerns fragmented and uneven enforcement by the NCAs. These differences in national approaches and the absence of the concept of an “infrastructure group” mean that even where corporate consolidation takes place, it is not easily translated into a simplified and integrated operating structure. The relative size of the harmonised and national rulebooks of the exchanges in the Euronext group can illustrate this. Figure 48. Number of pages in the Euronext exchange rulebooks Source: Consultant analysis. CCPs have an additional significance for financial stability in that one of their core functions is to take on and manage counterparty risk, so that the failure of one institution does not cascade through the financial system. Although in practice the risk management models used by CCPs in Europe and North America have enabled them to manage the global

financial crisis, the COVID crisis, and other periods of market turmoil without any CCP failing, the possibility exists that the margin and default fund resources held by a CCP may be inadequate to manage losses in a particularly volatile period. In this case, the CCP would have recourse to its Clearing Members to replenish its resources. The crisis would spread into the banking system if they could not do so. There is a perception that in such an event, the authorities in the country where the CCP was based and supervised by the NCA would step in to limit the contagion, although there is no obligation for them to do so. If supervision were centralised in ESMA, the link with national authorities would be broken, and it might be necessary to issue guidance to maintain confidence that resources would be available to limit contagion. Page 126 of 195 Study on consolidation and reducing fragmentation in trading and post-trading infrastructures in Europe Market participants’ views on

legal and regulatory issues Agreements and disagreements with statements on legal and regulatory issues 60. Number of respondents Source: Consultants’ survey of market participants. Full results in Annex 3 Recent studies on European capital markets Recent studies on developing European capital markets, the Letta report 61, the Draghi report 62, and the Noyer report 63, reinforce a strong need and policy momentum toward recalibrating EU supervisory architecture. While all three reports recommend strengthening ESMA’s role and powers, they differ in the overall scope of the recommendations. According to the Noyer report, which is the most detailed in the area of supervision, a “true single market cannot tolerate a fragmented supervision” and the current supervisory architecture “leads to disproportionate compliance costs and ultimately weighs on the competitiveness of European financial actors”. 64 This report, in particular, stresses that reform of ESMA’s governance and

running is a prerequisite to any extension of its power. Moreover, the study concludes that the mandatory supervision by ESMA is essential for the most cross-border and systemic market infrastructures 65 . The Draghi report echoes these recommendations, proposing ESMA’s direct supervision over (i) large multinational issuers, (ii) major regulated markets with trading platforms in various jurisdictions, and (iii) central counterparty platforms. 60 “No opinion” or “Don’t know” responses not shown. 61 Letta, E. (2024) 62 Draghi, M. (2024) 63 Noyer (2024a). 64 Noyer (2024b). 65 Noyer (2024c). Page 127 of 195 Study on consolidation and reducing fragmentation in trading and post-trading infrastructures in Europe 9. Conclusions and Recommendations “Integration of EU financial markets is essential for their future efficiency. Competition has a fundamental role to play both in the integration process and in any future market scenario as it contributes to sustainable,

attractive and highly performing capital markets and services to pension funds, asset managers and final investors” 66 . This statement remains valid 19 years after it was published by DG COMP in 2006, yet the objective of creating an integrated financial market remains unachieved. Capital markets exist to serve their end-users – issuers and investors – and financial market infrastructures support them. Currently, the EU’s capital market infrastructure is inefficient and costly, and does not support the SIU’s goals. A high-level comparison with the US shows the smaller overall size of EU capital markets but the much larger number of infrastructure organisations, especially in post-trade services. Table 20. Comparative data on EU and US capital markets EU USA Fixed income securities outstanding (bn EUR) 25 130 55 845 Equities market value (bn EUR) 10 613 59 700 Number of securities exchanges (EU: RMs for securities; US: National Securities Exchanges) 46 28 Number of

other trading venues (EU: MTFs for securities; US: Alternative Trading Systems) 63 77 Number of securities CCPs 10 2 Number of CSDs 29 2 Source: Market values: SIFMA 2025 Capital Markets Factbook; number of institutions: authors’ calculations and SEC. 9.1 The strategic goal The overarching objective remains the development of an integrated European market infrastructure aligned with the SIU’s goals. Achieving this goal requires not only technical and operational progress but also substantive legal harmonisation across EU Member States to address the persistent fragmentation in trading and post-trading services. 66 European Commission (2006). Page 128 of 195 Study on consolidation and reducing fragmentation in trading and post-trading infrastructures in Europe The target model for capital market infrastructure must strike a balance between achieving economies of scale and preserving competition and resilience: too many infrastructures result in a lack of economies

of scale, inefficiency, and complexity, but relying on a single infrastructure results in a lack of competition and resilience. The target is more than one market infrastructure in each infrastructure layer, but only a small number. The key principles for the structure should be those set out by DG COMP in 2006 67: • Competition in trading services is possible and desirable but may be impeded in various ways (for example, by restricted access to post-trade services). • Access to fungible clearing arrangements is one prerequisite for effective competition and must, therefore, be assured on a non-discriminatory basis. • CCP services could – and probably should – operate in a competitive environment, provided interoperability issues are overcome. • Vertical integration may result in foreclosure at all value chain levels, leading to welfare losses. The most efficient way of achieving integrated financial market structures is likely to be a combination of regulatory measures,

appropriate industry action, and applying competition rules. • Users and final investors have an important role to play in obtaining a competitive environment at all levels of securities trading and post-trading. In practice, this requires: • Open access between the infrastructure layers, meaning that transactions from any institution in one layer can flow to any institution in the next layer. • Interoperability in post-trade, meaning that a market participant can concentrate their activity in any institution in a layer and transact with any other participant using a different institution. For trading, it is possible to have a number of competing platforms offering different trading methodologies. The number and variety of trading venues currently exist as a result of a policy decision to encourage choice and competition, and, with order-routing technology, the costs of switching between trading platforms are insignificant. The principal source of liquidity fragmentation is the

fragmentation of the post-trade infrastructure. For clearing and settlement, the costs of switching between systems are significant. For most market participants, it will be preferable to concentrate their activity in one or a small number of systems. This means it must be possible to concentrate trades from all trading platforms in any single CCP and to route settlements from any CCP to any CSD. This is an established principle of 67 European Commission (2006). Page 129 of 195 Study on consolidation and reducing fragmentation in trading and post-trading infrastructures in Europe competition policy 68. To make this possible, interoperability within each layer must exist so that a participant can concentrate their activity in a single CCP or CSD independently of what its counterparties choose. While a model for interoperability between CCPs has already been established, a similar interoperability model between CSDs is not yet in place. This will require extensive legal

harmonisation and greater use of T2S for inter-CSD settlement. A consequence of this model is that the number of market infrastructures will reduce from today’s number, while remaining at a level that supports competition. This reduction will happen through market forces, provided legal barriers that prevent mergers are dismantled, and there is no official intervention that protects some infrastructures. In itself, of course, an efficient market infrastructure is a necessary but not a sufficient condition for an integrated European capital market. Broader success will depend on implementing measures to address fundamental issues, including incentives to allocate savings to risk capital and to use capital markets to finance investment. These, in turn, will require changes to national pension systems, tax policies, and other areas that affect savings and investment patterns outside our study’s scope. 9.2 Strengthening the legal underpinnings for consolidation The fragmented legal

landscape is one of the most significant barriers to consolidating and integrating market infrastructures. As documented by AMISeCo (2024), EPTF (2017), and previous initiatives such as the Legal Certainty Group and the Giovannini Reports (see box below), diverging national legal frameworks around company law, securities law, tax treatment, and conflict-oflaw rules continue to inhibit the smooth operation and consolidation of post-trade infrastructures. Efforts such as the Securities Law Legislation (SLL) project and the 2009–2010 consultations on securities law harmonisation were ultimately abandoned due to political, institutional, and technical complexities, illustrating the scale of the challenge. While technical improvements to post-trade infrastructure (e.g, T2S expansion, DLT experimentation) are important, they will not deliver their full potential without addressing the foundational legal fragmentation. A clear, enforceable, and harmonised legal regime is the cornerstone of

a resilient, competitive, and integrated EU capital market infrastructure. The Commission and co-legislators should prioritise these legal actions in the next phase of SIU reforms. 68 This objective was considered explicitly in the 2017 DG COMP decision on the proposed DBAG-LSE merger but appears not to have been part of the 2021 decision on the divestment of Borsa Italiana by LSE to Euronext. Page 130 of 195 Study on consolidation and reducing fragmentation in trading and post-trading infrastructures in Europe Market participants’ views on priorities for the way forward Agreements and disagreements with statements on priorities for the way forward 69. Number of respondents Source: Consultants’ survey of market participants. Full results in Annex 3 9.3 An “Opt-in” Model for deeper and faster Capital Markets Integration Policy and Legal Argument for an Opt-In Model for the Capital Markets Integration The need for progress is now urgent. The history of delay caused by

the search for consensus on harmonisation means a choice must be made between two approaches: an approach based on unanimity that will be slow and may never achieve its goal, or a more ambitious approach adopted by those countries that are ready to make progress, which remains open for others to join when they are ready. In the light of persistent divergences in legal, supervisory, and fiscal frameworks across Member States, establishing a fully harmonised EU capital market may be more realistically achieved through a phased, opt-in approach taking the form of a Single European Capital Markets Area (SECMA). This model would allow a group of willing Member States to move ahead with deeper legal and operational integration, while keeping the door open for others to join once politically and technically ready – an approach that reflects both legal precedent and institutional pragmatism in the EU. In the context of the conclusions of this study, it is not the intention to determine the

precise legal basis on which a prospective SECMA would ultimately be founded. Whether such an initiative would rely on the existing mechanisms of enhanced cooperation, on a treaty-based framework, or on a regulatory approach comparable to the development of SEPA, remains an open question. The institutional and legal design of SECMA may well follow a sui generis model, specifically tailored to the project’s unique structure and policy objectives. 69 “No opinion” or “Don’t know” responses not shown. Page 131 of 195 Study on consolidation and reducing fragmentation in trading and post-trading infrastructures in Europe Accordingly, our analysis focuses on identifying barriers to consolidation and fragmentation in trading and post-trading infrastructures and highlighting possible policy options, without prejudging the eventual legal or institutional foundation of SECMA. Enhanced Co-operation: Legal basis in the EU Treaties The EU legal order explicitly provides for

differentiated integration through the mechanism of enhanced cooperation (Articles 326-334 TFEU). This allows at least nine Member States to adopt binding measures in a specific policy field within the EU framework, when full unanimity cannot be achieved. Enhanced cooperation has already been applied in sensitive domains such as divorce law, the Financial Transaction Tax, and the European Public Prosecutor’s Office. A similar logic could apply to capital markets integration. Institutional Precedent: The Schengen Agreement The Schengen model demonstrates that a core group of Member States can achieve significant integration, in this case, in border and visa policy, without being held back by the slower political or legal readiness of others. Over time, participation expanded, illustrating the long-term inclusiveness of the opt-in model. SECMA could follow this model in capital markets, initially focusing on a harmonised legal and supervisory framework for trading and post-trading

infrastructures. Agreement Addressing Legal and Political Heterogeneity Many legal barriers to consolidation, such as differences in securities law, company law, insolvency law, and tax treatment, are rooted in deeply embedded national frameworks. While full EU-wide harmonisation may face long timelines and political resistance, a voluntary opt-in regime allows for developing a common legal platform among willing participants, with high legal certainty and supervisory coherence. ESMA could complement this by assuming an enhanced role in supervision and legal convergence. Creating Momentum through Legal and Regulatory Leadership Compatibility with the Internal Market An opt-in model enables legal experimentation and regulatory innovation. It would allow a coalition of Member States to adopt common rules on book-entry securities law, conflict-of-laws, withholding tax relief, and shareholder rights, paving the way for genuine cross-border consolidation of CSDs, CCPs, and trading venues.

Such a project’s political visibility and legal clarity could generate market confidence and incentivise broader participation. Compatibility with the Internal Market Such an approach does not undermine the integrity of the internal market. On the contrary, it respects the principles of subsidiarity and proportionality, while Page 132 of 195 Study on consolidation and reducing fragmentation in trading and post-trading infrastructures in Europe reinforcing the EU’s strategic goal of faster and deeper integrated capital markets. Legal safeguards under Articles 326-328 TFEU ensure that enhanced cooperation does not distort competition or undermine the functioning of the Union. SECMA and Principles of the Schuman Declaration of May 1950 The idea of SECMA follows the method articulated in the Schuman Declaration 70: European integration should advance through practical, sectorspecific achievements that create solidarity in fact, not merely in aspiration. Rather than attempting an

all-at-once overhaul, SECMA concentrates on the legal and supervisory underpinnings of the capital-markets infrastructure so that concrete, jointly administered solutions generate immediate, demonstrable benefits that will bring long-term results. The “solidarity in fact” will be reflected by an agreement among the participating Member States to a much greater harmonisation of their legal and tax systems, which may mean foregoing some national legal differences in private law. This mirrors Schuman’s call for “immediate action” on a “limited but decisive point,” using economic integration to deliver systemic gains and build trust for subsequent steps. SECMA also reflects the Declaration’s core design features: the pooling of key competences under the European aegis and openness to all Member States willing to participate. By relocating defined functions to a European level, SECMA follows the ECSC template of placing strategic economic functions under a common authority,

with decisions binding on participating states and with accession open to others as readiness and political will permit. This is the same institutional logic Schuman set out – pooling to create common interests and a durable alignment of incentives. Finally, the Declaration framed integration as a proportionate response to contemporary risks – “creative efforts” commensurate with the dangers of disunity. Today’s dangers are economic and geopolitical: fragmented markets, inefficiencies and high costs, and uneven supervision and fragmented enforcement that blunt the EU’s ability to mobilise savings at scale and compete globally. SECMA operationalises a proportionate response in the capital markets sphere: a voluntary, phased, opt-in pathway that delivers rapid, measurable progress for participating states while remaining fully compatible with the Treaties’ openness and with later EU-wide consolidation. In this sense, SECMA is not a departure from the EU’s founding

principles but its faithful application to the next “limited but decisive” field. 70 The Schuman Declaration of 9 May 1950 proposed pooling the coal and steel production by the willing six Member States. The European Coal and Steel Community thus created was the first in a series of supranational European institutions which ultimately led to today’s European Union. See Link Page 133 of 195 Study on consolidation and reducing fragmentation in trading and post-trading infrastructures in Europe The difficulty of achieving harmonisation across the EU There is a history of initiatives intended to achieve harmonisation of aspects of financial markets across the EU that have failed to achieve their goals. 1. Giovannini Reports (2001 & 2003) The Giovannini Group identified 15 barriers to efficient EU cross-border clearing and settlement, including legal uncertainties on the enforceability of rights in securities, different tax procedures, and incompatibility of national laws.

Despite progress on some technical and regulatory fronts (e.g, CSDR and T2S), several legal barriers, especially those linked to national company law, securities law, and insolvency law, remain unaddressed more than 20 years later. 2. Legal Certainty Group (2005-2008) The Legal Certainty Group (LCG) was established by the European Commission to address the legal barriers identified by the Giovannini Reports, particularly those related to the holding, transfer, and settlement of securities across borders. In its 2008 Second Advice, the LCG highlighted fundamental divergences in property law, intermediated securities law, and conflict-of-laws rules, which affect investor protection and legal certainty in cross-border holdings. Despite the Group’s detailed recommendations, including the need for an EU legal framework for book-entry securities and harmonised conflict-of-laws rules (e.g, a common PRIMA rule), most of its proposals were not implemented. The subsequent Securities Law

Legislation (SLL) initiative was eventually abandoned, illustrating the political and legal difficulty of harmonising deeply rooted national legal systems in the area of securities. 3. Harmonisation of Securities Law (UNIDROIT and European Commission initiatives, 2009-2011). The European Commission launched consultations on harmonising securities law in 2009 and 2010, aiming to standardise key legal concepts such as the holding and disposition of intermediated securities. 71 These efforts stalled in the face of resistance from Member States and market participants, particularly due to concerns over national property law, contract law, and insolvency law. Parallel efforts by UNIDROIT to promote the Geneva Securities Convention (2009) also saw very limited ratification in the EU. 4. Societas Europaea (SE) Regulation The SE statute, adopted in 2001, was intended to provide a harmonised European legal form for companies operating across borders. However, the instrument has seen limited use

due to continued reliance on national laws for many aspects of SE governance (e.g, board structure, employee participation, legal capital). It highlights the challenge of creating fully harmonised legal vehicles in a union of diverse legal systems. 71 Conac, Segna, Thévenoz (2013). Page 134 of 195 Study on consolidation and reducing fragmentation in trading and post-trading infrastructures in Europe 5. TARGET2-Securities (T2S) – Euro Area Focus T2S, launched by the ECB to create a single settlement platform for securities across Europe, remains confined to the euro area plus Denmark. While technically successful, its limited adoption outside the eurozone reflects legal, currency, and policy divergences. Moreover, T2S addresses only the technical layer of post-trade, while legal harmonisation at the CSD and investor rights level remains incomplete. 6. Settlement Finality Directive (SFD) – Limited to Domestic Scope While the SFD (Directive 98/26/EC) establishes a framework for

the finality of settlement instructions, its transposition has varied across Member States, and its scope does not fully extend to third-country CSDs. A 2023 Commission review acknowledged remaining legal uncertainties, particularly in the crossborder context. Reform is under consideration 7. Persistent Differences in Tax Treatment of Securities Attempts to harmonise the taxation of financial instruments (e.g, withholding tax relief procedures, financial transaction taxes) have repeatedly failed. The complexity and sensitivity of national tax regimes have led to divergent practices, with national reporting and withholding obligations imposed on CSDs and intermediaries. These differences hinder efficient cross-border holding and post-trade consolidation. 8. Lack of Legal Convergence in Shareholder Rights Implementation Despite the Shareholder Rights Directives (2007/36/EC and SRD II 2017/828), Member States continue to diverge in shareholder identification, proxy voting, and general

meeting participation rules. The system created by differing transpositions is opaque. This legal fragmentation undermines the EU objective of empowering investors and facilitating cross-border corporate governance and poses operational barriers for investor services across jurisdictions. 9. European Post-Trade Forum (EPTF) Report (2017) The EPTF revisited many of the Giovannini barriers and concluded that several still exist or have transformed in nature. It emphasised the persistent lack of harmonisation in shareholder identification, corporate action processing, and legal concepts of ownership. The report called for renewed policy focus but acknowledged that deep-rooted legal divergence continues to obstruct integration. The key elements of an agreement among Member States for accelerated progress would be the following: Implement a single harmonised legal and tax regime for securities Those countries that choose to join the agreement will implement a harmonised legal regime

covering at least the nature of securities, their holding and transfer, and insolvency rules, as well as a single tax regime for securities. One of the fundamental legal obstacles to integration is the fragmentation of substantive securities law across Member States, particularly in relation to the legal nature of securities, rights in intermediated securities, and rules on transfer and settlement. Page 135 of 195 Study on consolidation and reducing fragmentation in trading and post-trading infrastructures in Europe This creates legal uncertainty in cross-border holdings, undermines investor confidence, and solidifies the national dominance of local CSDs. Adopt an EU Regulation on book-entry securities law A harmonised set of rules governing book-entry securities’ creation, transfer, and legal nature is essential. This should be technologically neutral and establish legal certainty for cross-border holdings. This legal framework should build on the Giovannini Group and Legal

Certainty Group work and the Securities Law Legislation initiative. This would offer a uniform framework for determining applicable law in cross-border holdings. It could eliminate the legal monopolies CSDs currently enjoy under local law. A unified conflict-of-laws regime should determine the applicable law governing securities accounts and investor rights. Streamline national tax procedures Tax-related frictions, especially around withholding tax relief and financial transaction taxes, are a major obstacle to post-trade integration. Uncoordinated or opaque tax withholding rules, transaction taxes, and reporting obligations across Member States act as legal frictions in post-trading. These create uncertainty, increase legal and compliance costs, and are often more disincentive than regulatory hurdles. Building on the FASTER initiative 72, the Commission should accelerate the adoption of common EU-wide procedures and digital solutions to simplify and harmonise tax processing across

Member States. Participating countries would subscribe to a Code of Conduct on Taxation of Securities Transactions, combined with binding common standards for tax relief at source, drawing on OECD TRACE and implementing these in a harmonised EU legal instrument (possibly a Directive). Reform the supervisory structure Because the role of NCAs in overseeing market infrastructure leads to another layer of fragmentation, the possibility of centralising oversight at ESMA, particularly in cross-border cases or within a future opt-in SECMA, should be explored to mitigate regulatory divergence. The goal is a centralised and streamlined supervisory structure, while recognising the importance of direct contact between local supervisors and local institutions with local knowledge in the local language. This could be achieved by centralising supervisory responsibility in a reformed and fully-resourced ESMA, governed by an 72 The Faster and Safer Tax Relief of Excess Withholding Taxes (FASTER)

Directive introduces a common EU digital tax residence certificate in order to simplify the process of either obtaining relief at source or a quick refund of withholding taxes on securities was adopted in 2024. The first draft Directive to introduce a uniform withholding tax in the EU was proposed in 1989. Page 136 of 195 Study on consolidation and reducing fragmentation in trading and post-trading infrastructures in Europe independent board of experts. Existing NCAs of participating countries would operate as local offices of ESMA 73. Create a competitive market-led infrastructure based on open access and interoperability Competing infrastructures bring cost-efficiency and innovation and provide resilience against a single point of failure, but only if users can choose freely between infrastructures that are interoperable with each other and large enough to achieve significant economies of scale. To achieve this, the programme must include rule changes such as: • Ensure

infrastructure consolidation is market-led, without state ownership, and can generate economies of scale. • Mandate CCP interoperability using efficient CCP interoperability models to maintain competition. • Mandate CSD interoperability using efficient CSD interoperability models to maintain competition. Openness to participation by non-EU countries A capital market gains strength from a greater number of investors, issuers, and intermediaries. The EU could use this model to strengthen links with neighbouring markets in the EEA, Switzerland, and the UK. 28th Regime: an unattractive alternative An alternative approach that has been proposed is to adopt a “28th Regime”. The “28th Regime” (an optional EU-wide legal framework for issuers) is put forward as a pragmatic legal solution, allowing issuers in any Member State to operate under an EU-wide legal framework separate from their national legal framework. In some versions of the proposal, the “28th Regime” is only

available to new or technology-based companies. While this approach may promote gradual convergence, it can also create dual legal systems and undermine investor protection or legal certainty if not properly enforced or understood. Hence, it risks adding another layer of complexity compared with the SECMA proposal, under which a single legal regime would apply to all companies across all the participating countries. Therefore, if the “28th Regime” route is chosen, it must include: • A clear legal hierarchy between national and EU regimes. • Enforceable EU-wide supervisory coordination, likely under ESMA. 73 This approach is developed more fully in Veron (2025). Page 137 of 195 Study on consolidation and reducing fragmentation in trading and post-trading infrastructures in Europe • An evaluation clause for potential transition to full harmonisation based on uptake and effectiveness. It should be remembered that previous attempts to develop a form of “28th Regime”

struggled to get off the ground (see box above). The following table summarises the main differences between the two approaches. Dimension SECMA “28th Regime” Legal structure Creates a single, common regime for participating Member States, replacing divergent national rules in core areas. Creates an optional parallel regime alongside national laws; issuers may opt in or out. Impact on fragmentation Reduces fragmentation by default: one rulebook applies uniformly across participating markets. Risk of increased complexity, as two legal systems coexist (national and EU “28th Regime”), creating legal uncertainty. Scope of application Applies broadly to all issuers and market participants in participating jurisdictions. Often limited in scope (e.g new or techbased companies in some proposals); uptake depends on voluntary adoption. Supervision Embeds centralised supervision (via ESMA or lead authority model), ensuring consistent enforcement across borders. Relies on

coordination of national supervisors across parallel regimes, which risks uneven enforcement. Investor protection Ensures uniform rights and protections under a single framework. Dual regimes may confuse investors, with differing rights and disclosure standards depending on issuer choice. Market impact Builds scale and credibility by consolidating markets under one regime; sends a strong signal of EU integration. Likely limited uptake and fragmented impact, as many issuers would remain under national regimes. Precedent/track record Builds on proven EU successes with centralised frameworks (e.g, SSM in banking) Previous “28th Regime” attempts (e.g, SPE company form) failed to gain traction due to a lack of clarity and limited appeal. Long-term effect Structural, sustainable integration of capital markets across Europe. Incremental and uncertain convergence; risks remaining marginal in practice. Policy-oriented initiatives to harmonise EU capital markets law In

considering potential ways forward for consolidation and deeper harmonisation of EU capital markets, it is instructive to draw on recent academic and expert-driven initiatives to further harmonise EU capital markets law beyond the current acquis. Page 138 of 195 Study on consolidation and reducing fragmentation in trading and post-trading infrastructures in Europe 1. European Capital Markets Code One prominent example is the European Capital Markets Code concept, developed under Professor Rüdiger Veil’s leadership and an international research group. The project envisages a comprehensive codification of the fragmented body of EU capital markets legislation, thereby creating a coherent and accessible framework comparable to codifications in other fields of law in Europe 74. 2. European blueprint for civil liability for misleading or false prospectuses. Another significant initiative is the work on a European blueprint for civil liability under Article 11 of the Prospectus

Regulation, developed by the International Working Group on Prospectus Liability led by Professors Danny Busch and Matthias Lehmann. This project addresses the divergence of national liability regimes for misleading or incomplete prospectuses, which remains a material barrier to cross-border issuance and investor protection. By proposing a harmonised approach to prospectus liability, the initiative seeks to enhance legal certainty, reduce transaction costs, and foster deeper integration of European capital markets 75. The concrete blueprint for uniform European prospectus liability rules was proposed in response to the ESMA Call for Evidence on Prospectus Liability published in October 2024 76. The methodological and substantive approach presented in the blueprint deserves endorsement and adoption at the EU level. 3. EU Charter for Protection of Users of Financial Services The initiative to develop an EU Charter on the Protection of End-Users in Financial Markets, led by Professor

Filippo Annunziata, focuses on consolidating and elevating investor and consumer rights into a single coherent framework. Such a Charter would not only improve transparency and trust but also provide a common baseline of protection across Member States, thereby reducing fragmentation of retail investor regimes. Strengthening end-user safeguards can, in turn, promote greater cross-border participation and reinforce the legitimacy of deeper market integration 77 . 4. Less is More Report The “Less is More” Report (2025) 78 underscores the Commission’s renewed simplification agenda in the financial regulatory domain, advocating for streamlined, proportionate rules that reduce complexity and compliance burdens. The report reflects a strategic shift toward simplification over expansion, arguing that a leaner regulatory framework can enhance competitiveness, lower operational costs, and facilitate market participation – especially for smaller actors – thereby directly supporting the

goals of SECMA. 74 Veil (2024); Veil (2025). 75 Busch, Lehmann (2025). 76 Available at Link (accessed: 28.092025) 77 Annunziata (2022). 78 European Association of Co-operative Banks (EACB). (2025) Page 139 of 195 Study on consolidation and reducing fragmentation in trading and post-trading infrastructures in Europe 9.4 Immediate actions In the short term, EU markets can make progress towards such an eventual model, and we have identified a number of options to facilitate this: Drive harmonisation of corporate action and securities processing rules The fragmented treatment of corporate actions (e.g, dividend payments, voting rights) and securities identification, particularly in the context of cross-border holdings, reinforces inefficiencies and prevents post-trading integration. The Commission should consider proposing binding technical standards under CSDR, enhancing enforcement, or updating technical standards under SRD II, including rights distribution, voting, and record

dates. A harmonised taxonomy for security types (similar to the Financial Instruments Reference Database System (FIRDS)) could also be enforced. Harmonising settlement law: converting the Settlement Finality Directive into a Regulation The Settlement Finality Directive (SFD) remains a cornerstone of legal certainty for the finality of payments and securities settlement across the EU. However, as it is currently a directive, it has been transposed unevenly across Member States, leading to legal fragmentation and uncertainty, particularly in cross-border contexts. Converting the SFD into a directly applicable regulation would ensure uniform application of settlement finality rules, reduce legal risk, and strengthen the foundation for interoperable, consolidated market infrastructures. This reform would align with recent policy calls from AMI-SeCo and the European Parliament for greater legal convergence in post-trade processes. Harmonising collateral law: converting the Financial

Collateral Directive into a Regulation The Financial Collateral Directive (FCD) remains a cornerstone of the EU’s legal framework for cross-border collateral arrangements. However, over two decades after its adoption, its implementation has revealed significant divergences across Member States regarding the scope of eligible collateral, recognition of title transfer arrangements, enforcement procedures, and close-out netting. These inconsistencies undermine legal certainty and hinder the efficient cross-border use and mobilisation of collateral, an increasingly critical function in integrated EU capital markets. Converting the FCD into a directly applicable Regulation would enhance uniformity, eliminate transposition-related discrepancies, and provide market participants with clear and enforceable rules throughout the Union. It would also Page 140 of 195 Study on consolidation and reducing fragmentation in trading and post-trading infrastructures in Europe modernise the legal

framework in line with evolving market practices, including the use of dematerialised securities, triparty collateral arrangements, and digital collateral frameworks. By aligning the treatment of financial collateral across jurisdictions, such a reform would complement the goals of the CSDR, EMIR, and CMU, reduce systemic risk, and facilitate the consolidation of trading and posttrading infrastructures. As with the proposed conversion of the Settlement Finality Directive into a Regulation, this step would significantly advance legal convergence and market integration. Centralise supervision of market infrastructures Despite ESMA’s coordination powers, the supervision of trading venues, CCPs, and CSDs remains fragmented along national lines. This not only leads to inconsistency in supervision and enforcement but also creates protectionist behaviours. A more effective framework is introducing a “Lead Authority” model for FMI groups, comparable to the Single Supervisory Mechanism in

banking. This could be achieved by amending ESMA’s founding regulation (Regulation (EU) No 1095/2010) to grant ESMA direct, binding supervisory authority over critical cross-border FMIs. Targeted adjustments to sectoral legislation, notably the CSDR and MiFIR frameworks, would complement this by aligning specific supervisory mandates with ESMA’s central and enhanced role. The process should be phased: priority should be given to centralised supervision of CCPs with significant cross-border relevance, followed by a gradual extension to CSDs and trading venues. This sequenced approach would ensure both effectiveness and feasibility, while addressing the most acute risks first. Introduce the legal concept of a market infrastructure group There is no concept of a market infrastructure group or provisions for supervising such groups. As a result, the same onerous requirements apply to an outsourcing arrangement with an arm’s length provider as to an outsourcing arrangement within the

group. This can be addressed by amending MiFID II, CSDR, and the related RTS to require only notification for outsourcing to other group companies and allow staff sharing between them. In addition, other streamlining can be carried out within the MOUs governing supervision of market groups in relation to audits and approval of rule book changes. Page 141 of 195 Study on consolidation and reducing fragmentation in trading and post-trading infrastructures in Europe Clarify responsibility for recovery and resolution when supervisory responsibility is centralised A move to centralised supervision of market infrastructures risks making the responsibility of national authorities for recovery and resolution look anomalous. Responsibility needs to be reallocated to a suitable authority with cross-market powers. Mandate open access between trading platforms, CCPs, and CSDs The interoperable model for CCPs has widespread support, as it maintains choice and competition in providing clearing

services. It also enables each market user to centralise its positions in one CCP. The preferred clearing model has some support from market participants, as it is felt that this approach protects the local market. Still, it results in fragmentation of clearing, increasing costs per trade To encourage wider adoption of the interoperable model, while protecting local markets, we recommend a balanced set of requirements: • All exchanges and trading platforms must offer trade feeds to all CCPs that ask for them (already provided for in MIFID II). • All CCPs must enter into interoperability arrangements with the other CCPs to provide clearing for a given market. • Any CCP wishing to provide clearing in a given market must do so for all securities and have access arrangements that allow smaller local CMs to participate. • Depending on efficient CSD interoperability, CCPs must offer settlement feeds to all CSDs that ask for them. CSD interoperability To support open access from CCPs

to CSDs, there must be CSD interoperability along the same lines as CCP interoperability. The objective must be to allow each market participant to make their choice of CSD independent of the choice made by their counterparty, with the resulting settlements between CSDs managed by CSD links across T2S. This is an ambitious objective and requires the implementation of the greater part of the package of recommendations. The CSDR and EMIR Level 2 measures should be amended to mandate operational and legal interoperability among infrastructures, ensuring users can benefit from cross-border competition. Reform T2S governance To encourage greater adoption of T2S, responsibility for the commercial management, operation, and development of T2S should rest with a governance Page 142 of 195 Study on consolidation and reducing fragmentation in trading and post-trading infrastructures in Europe structure in which users and participating non-euro central banks are fully represented. As a

minimum, to maintain the level of EU markets’ resilience, T2S should be made subject to the same operational and risk requirements, as the CSDs which have outsourced their settlement activity to T2S. CSD consolidation The case studies in Chapter 7 identified a series of models for CSD consolidation. Addressing the legal and ownership barriers identified above will create momentum for more CSDs to adopt one of these models, especially when faced with the costs of preparing for T+1 and eventually T+0 settlement. National laws that mandate the use of domestic CSDs for primary issuance or require specific domestic account structures (e.g, individual vs omnibus) should be reviewed. ESMA and the Commission should consider infringement procedures or propose amendments to CSDR to ensure effective cross-border issuance. Strengthen systemic resilience Where competing trading venues operate alongside each other, it is unnecessary, and potentially damaging to financial stability, for trading to

stop because one venue suffers an outage. Strengthening resilience means ensuring that no single venue is critical. In particular, if an RM suffers an outage, arrangements must be in place to adopt an alternative reference price and closing price, and market participants must ensure that their systems are not hard-coded to rely on any single trading venue. Make the collection and dissemination of statistics a formal responsibility of ESMA, with the resources to carry it out Throughout this report, we have highlighted areas where current, reliable statistics are unavailable. Access to timely, consistent, and reliable information is one of a market’s foundations. Most of the necessary data are currently reported to NCAs. ESMA should have a formal and fully-funded responsibility for collating and publishing market-wide statistics. Prepare for the adoption of DLT-based solutions Although DLT-based solutions are not currently sufficiently mature to provide a solution for Europe’s

capital markets, they are likely to reach that point in the future. A strategic design project should be undertaken to understand the most effective form of future markets, exactly what digital infrastructure is necessary, and how appropriate regulatory and legal regimes can support this. Page 143 of 195 Study on consolidation and reducing fragmentation in trading and post-trading infrastructures in Europe Annex 1: Notes on competition cases The following notes describe certain features of competition cases this century that have helped to shape the current market infrastructure. They focus on the aspects relevant to this study and thus skip most of the extensive discussions of derivative markets. They are intended to highlight points of interest and not necessarily provide a full summary of the decision. Clearstream (European Commission, 2004) 79 The investigation arose when Euroclear Bank sought direct access to the system used in Clearstream Banking Frankfurt (“CBF”, the

German CSD) for registered shares in Germany and faced delays and higher prices for doing so. In investigating this case, the Commission distinguished between “primary” settlement taking place in the entity where securities have been deposited, and “secondary” settlement performed by intermediaries. It concluded that CBF held a dominant position in the market by virtue of the fact that it was the only Wertpapiersammelbank in Germany and competition was unlikely to enter the market: “the barriers to entry, in terms of regulations, technical requirements, interest by market participants, cost of entry, cost for customers and likelihood to provide competitive products, are so significant that the possibility of potential market entry exercising competitive constraints on CBF can be excluded in the foreseeable future”. It found that the abusive behaviour of CBF consisted of price discrimination against EB and refusal to provide access to clearing and settlement services. No

fines were imposed, given that there had been no previous decisions or cases in the area of clearing and settlement. Deutsche Börse and Euronext proposed mergers with the London Stock Exchange (UK Competition Commission, 2004-5) 80 In December 2004, Deutsche Börse AG (DBAG) announced that it was in discussions with LSE with a view to making a recommended cash offer. Euronext confirmed its interest in a possible cash offer for LSE in January 2005. Both proposed mergers were referred to the Competition Commission in the UK. The Competition Commission’s conclusions were the following: • Neither merger would likely result in a loss of competition for on-book equity trading services, as other trading venues provided competition. 79 European Commission (2004). 80 Competition Commission (2005). Page 144 of 195 Study on consolidation and reducing fragmentation in trading and post-trading infrastructures in Europe • At this time, LSE did not own LCH. Clearnet (“LCH”) had

appointed LCH as CCP for its equity trades following a competitive selection process in 2003. • It was likely that DBAG’s acquisition of LSE would result in Eurex Clearing, fully owned by DBAG, being appointed as CCP for LSE. This would enable DBAG to foreclose competitors' entry into the trading of UK equities and result in a significant loss of competition. • Euronext had a 41.5% ownership share in LCH with its voting rights capped at 24.9% However, over 60% of LCH’s fee income came from trades on Euronext exchanges, which would increase following a merger between Euronext and LSE. This would likely enable a combined Euronext/LSE to foreclose entry to UK equity trading. • There was little competition in settlement services, and neither merger would result in a loss of competition. The Competition Commission considered several structural and behavioural remedies and concluded that the following remedies would effectively redress the significant loss of competition in

either case. In the case of the acquisition of LSE by DBAG: • A requirement that LSE not clear through Eurex Clearing (or any other clearing provider under the control and/or influence of DBAG); or • A requirement that DBAG adopts structural measures, including limits on DBAG’s shareholding and board representation in any clearing provider that DBAG seeks to appoint to LSE, and introduces certain behavioural commitments; or • Prohibition of the proposed merger. In the case of the acquisition of LSE by Euronext: • A requirement that Euronext adopts structural measures, including limits on Euronext’s shareholding and board representation in LCH or any other clearing provider that Euronext seeks to appoint to LSE, and introduces certain behavioural commitments; or • Prohibition of the proposed merger. • Neither acquisition went ahead. Deutsche Börse and NYSE Euronext proposed a merger 81 In June 2011, NYSE Euronext and DBAG proposed to merge. NYSE Euronext was the US

holding company for NYSE, Euronext, and NYSE Liffe, a derivatives exchange. DBAG was a vertically integrated group consisting of cash and derivative exchanges, clearing, and settlement in Germany. The European Commission investigated the proposed merger. 81 European Commission (2012). Page 145 of 195 Study on consolidation and reducing fragmentation in trading and post-trading infrastructures in Europe The greater part of the investigation concerned the two groups’ derivatives businesses. The proposed merger was blocked on the basis that the parties were each other’s closest actual and potential competitor at the individual, national, and European level, holding almost 100% of the markets for exchange-traded single stock equity derivatives and European exchange-traded interest rate derivatives. In addition, the notified transaction would eliminate the closest competitor in the area of new European exchange-traded equity index derivatives. No concerns were raised regarding

equity or bond trading. The Commission did not identify factors that could strengthen the vertical silo, based on the fact that MTFs had been able to enter the market using other clearing houses. The transaction did not raise concerns regarding settlement, mainly because of the de facto national monopoly of national CSDs due to national regulations and requirements. LSE Group is acquiring control of LCH.Clearnet 82 LSE Group was the holding company of the LSE and Borsa Italiana, which included the Italian CCP. LCHClearnet (“LCH”) owned LCHClearnet Ltd in the UK and LCH.Clearnet SA in France Clearing members owned 83% of LCH, with 17% owned by trading venues. LSE proposed to take ownership of 60% of LCH, with 40% held by users. LSE would have the right to appoint four of the 17 directors of LCH, with approval rights for eight directors. An open-access provision was to be added to the Articles of Association of LCH, with any change requiring a majority of 80% of shareholders: •

Clearnet’s services must be offered on fair, reasonable, open and nondiscriminatory terms, and on a basis such as LCH. • Clearnet’s risk is adequately controlled. • No exchange will be favoured over any other, and LSEG’s trading services users will not be favoured over any other exchange’s users. The OFT considered the non-horizontal effects on competition and assessed whether the parties would have the ability and incentive to engage in a uniform or discriminatory price rise, a refusal to supply, or the degradation of quality. It concluded that the open-access provision limits the parties’ ability to engage in total foreclosure and their incentive to do so. The OFT did not refer the merger for further investigation, and it went ahead. 82 Office of Fair Trading (2013). Page 146 of 195 Study on consolidation and reducing fragmentation in trading and post-trading infrastructures in Europe Deutsche Börse proposed a merger with LSE 83 DBAG and LSE, which were now 60%

shareholders of LCH, proposed to merge. The Commission reviewed the two dimensions of financial market infrastructure – the asset classes and the value chain – and focused on the asset classes. It noted the key characteristics of market infrastructure markets: • Strong network effects, economies of scale, and scope translate into incumbency advantage and high barriers to entry. • A differentiated customer base, which impacts the relevance of home bias and the degree of price sensitivity. • The regulatory framework. The Commission analysed the governance structure put in place between LSE and LCH (described in the 2013 review above) and concluded that LSE had at least negative control over LCH decisions. The operating principles did not effectively limit LSE’s ability to implement anti-competitive behaviour as long as it was not openly discriminatory. The Commission concluded that the proposed merger would significantly impede effective competition in clearing bonds. In

addition, it analysed the ability of a CCP to direct settlement flows and the collateral location to a CSD of its choice, in other words, away from Euroclear and to Clearstream, which would be part of the new group through its ownership by DBAG. The Commission concluded that it would significantly impede effective competition in the settlement of fixed income securities and collateral management 84. To respond to these concerns, LSE and DBAG proposed to sell the French CCP, LCH SA, to Euronext. However, this commitment, together with further (unpublished) commitments, was not accepted as eliminating the competition concerns, particularly because LCH SA relied on receiving a trade feed from the trading platform MTS, which would remain within the new group. LSE Group divestment of Borsa Italiana to Euronext 85 In the context of its proposal to acquire Refinitiv, LSE committed to divesting the Borsa Italiana group to Euronext. The Borsa Italiana group included the stock exchange, CCP

(CCG), and CSD (Monte Titoli). The Commission reviewed the independence of Euronext and its financial resources and expertise to maintain and develop Borsa Italiana. It considered the horizontal aspects of the proposed acquisition (where Euronext and Borsa 83 European Commission (2017). 84 European Commission, (2017), paragraph 709. 85 European Commission (2021). Page 147 of 195 Study on consolidation and reducing fragmentation in trading and post-trading infrastructures in Europe Italiana both provided listing and trading services for securities). It also reviewed the vertical aspects. In particular, it reviewed the vertical link between trading and clearing and concluded that, as CCG’s business was limited to Italy, it was not likely to create competition concerns. It also reviewed the vertical link between trading and settlement; as these links were not merger-specific, it concluded they were not likely to create competition concerns. The divestment to Euronext went ahead.

Page 148 of 195 Study on consolidation and reducing fragmentation in trading and post-trading infrastructures in Europe Annex 2: Stakeholder interviews # Stakeholder Global HQ / EU Base 1. ABN AMRO Netherlands (Amsterdam) 2. AFG France (Paris) 3. BlackRock United States (New York) / Belgium (Brussels) 4. BNP Paribas France (Paris) 5. BNY Mellon United States (New York) / Ireland (Dublin) 6. Capital Group United States (Los Angeles) / United Kingdom (London) 7. Citadel Securities United States (Chicago) / United Kingdom (London) 8. Danske Bank Denmark (Copenhagen) 9. Deka Germany (Frankfurt) 10. Deutsche Bank Germany (Frankfurt) 11. Elana Bulgaria (Sofia) 12. Expat Bulgaria (Sofia) 13. Flow Traders Netherlands (Amsterdam) 14. Goldman Sachs United States (New York) / United Kingdom (London) 15. Helaba Invest Germany (Frankfurt) 16. HOLD Asset Management Hungary (Budapest) 17. Intercapital Croatia (Zagreb) 18. Jane Street United

States (New York) / United Kingdom (London) 19. Raiffeisen Bank Austria (Vienna) 20. Saxo Bank Denmark (Copenhagen) 21. Signal Iduna AM Germany (Dortmund) 22. Société Générale France (Paris) 23. UniCredit Italy (Milan) 24. Aquis United Kingdom (London) 25. Athex Group Greece (Athens) 26. Cboe Clear United Kingdom (London) / Netherlands (Amsterdam) 27. Cboe Europe United Kingdom (London) / Netherlands (Amsterdam) 28. Deutsche Börse Germany (Frankfurt) 29. Euroclear Belgium (Brussels) 30. EuroMTS / MTS SpA United Kingdom (London) / Italy (Rome) 31. Euronext Netherlands (Amsterdam) / Belgium (Brussels) / France (Paris) 32. GPW (Warsaw Stock Exchange) Poland (Warsaw) Page 149 of 195 Study on consolidation and reducing fragmentation in trading and post-trading infrastructures in Europe # Stakeholder Global HQ / EU Base 33. KPDW CCP Poland (Warsaw) 34. London Stock Exchange Group United Kingdom (London) 35. NASDAQ Baltics

Estonia (Tallinn) / Latvia (Riga) / Lithuania (Vilnius) 36. NASDAQ Nordic Sweden (Stockholm) / Denmark (Copenhagen) / Finland (Helsinki) 37. SIX/BME Spain (Madrid) / Switzerland (Zurich) 38. The Depository Trust and Clearing Corporation United States (New York) / United Kingdom (London) 39. TradeWeb United States (New York) / United Kingdom (London) 40. Wiener Börse Austria (Vienna) 41. Autorité des marchés financiers (AMF) France 42. Autoriteit Financiële Markten (AFM) Netherlands 43. Belgian National Bank Belgium 44. Central Bank of Ireland Ireland 45. Commission de Surveillance du Secteur Financier (CSSF) Luxembourg 46. Cyprus Securities and Exchange Commission / Επιτροπή Κεφαλαιαγοράς (CySEC) Cyprus 47. European Bank for Reconstruction and Development United Kingdom (London) 48. European Central Bank Germany (Frankfurt am Main) 49. European Securities and Markets Authority France (Paris) 50. Federal Financial

Supervisory Authority / Bundesanstalt für Finanzdienstleistungsaufsicht/ Germany 51. Finanstilsynet Denmark 52. Latvijas Banka Latvia 53. Lietuvos bankas Lithuania 54. Ministry of Economy and Finance (w. Banca d’Italia) Italy 55. Ministry of Finance Poland 56. Association for Financial Markets in Europe United Kingdom (London) / Belgium (Brussels) / Germany (Frankfurt) 57. Confederation of Danish Industry Denmark (Copenhagen) 58. Danish Investment Association Denmark (Copenhagen) 59. European Association of CCP Clearing Houses Belgium (Brussels) Page 150 of 195 Study on consolidation and reducing fragmentation in trading and post-trading infrastructures in Europe # Stakeholder Global HQ / EU Base 60. European Central Securities Depositories Association Belgium (Brussels) 61. European Fund and Asset Management Association Belgium (Brussels) 62. European Principal Traders Association Belgium (Brussels) 63. EuropeanIssuers Belgium

(Brussels) 64. Federation of European Securities Exchanges Belgium (Brussels) 65. France Post-Marche Association France (Paris) 66. German Investment Funds Association Germany (Frankfurt) 67. Swedish Investment Fund Association Sweden (Stockholm) 68. Adamantia United Kingdom (London) 69. Avenir Registrars Ireland Ireland (Dublin) 70. Axiology Lithuania (Vilnius) 71. BMLL Technologies United Kingdom (London) 72. Ediphy United Kingdom (London) 73. Finance-Watch Belgium (Brussels) 74. Market Structure Partners United Kingdom (London) 75. Shelly Group Bulgaria (Sofia) 76. ValueExchange Hong Kong (Hong Kong) / United Kingdom (London) Page 151 of 195 Study on consolidation and reducing fragmentation in trading and post-trading infrastructures in Europe Annex 3: Survey responses Section 1: General Information We carried out a survey to provide a systematic assessment of market participants’ views. The questionnaire was distributed through

relevant trade associations across Europe during June 2025, and the deadline for responses was extended into August to allow for late responses. We received 29 responses. Three were discarded, as one was a second response from the same respondent, and two were not submitted by market participants. The remaining 26 responses nevertheless present a diverse geographical and institutional coverage. It must be underlined that due to a low participation rate and ensuing small sample size, any conclusions drawn from this survey must be weighed with caution. Figure 49. Q1 Country where your Organisation is based? The survey respondents are based across a diverse range of EU member states, with the highest representation from Germany (4), Denmark, and Portugal (each 3). Other countries represented include Hungary (2), Romania (2), Netherlands (2), France (1), Italy (1), Greece (1), Ireland (1), Bulgaria (1), Croatia (1), United Kingdom (1), and Luxembourg (1). One respondent was headquartered

in the US, and one operates globally. Respondents identified themselves as using the European capital markets in the following capacities (some respondents reported more than one capacity): Page 152 of 195 Study on consolidation and reducing fragmentation in trading and post-trading infrastructures in Europe Capacity Number of responses Managing client assets 13 Custodian (safekeeping client assets) 10 Wholesale broker (institutional) 8 Retail broker (retail) 8 Market maker (own account) 8 Investing my institution’s own funds 4 Trade association 4 General Clearing Member (CCP clearing) 3 Financial Market Infrastructure provider 1 Solution and services provider 1 Fund manager and administrator (UCITS/MiFID) 1 Other 2 Respondents were asked to identify their position in the organisation. Titles vary, but the main positions identified were: Position Number of respondents Executive / Senior Management 4 Heads of Functions / Department 8 Investment /

Fund Management 4 Market Infrastructure / FMI 3 Advisory / Analyst roles 3 Specialised Strategy roles 4 Page 153 of 195 Study on consolidation and reducing fragmentation in trading and post-trading infrastructures in Europe Figure 50. Q2 Please mark all regions where your Organisation conducts transactions. Page 154 of 195 Study on consolidation and reducing fragmentation in trading and post-trading infrastructures in Europe Section 2: The Saving and Investments Union Figure 51. Q3 How far have you been able to translate the objectives of the SIU into business objectives for your firm? Figure 52. Q4 How far has the SIU project enabled your firm to achieve its business objectives? Page 155 of 195 Study on consolidation and reducing fragmentation in trading and post-trading infrastructures in Europe Figure 53. Q5 How far have the following factors posed barriers to your firm achieving its business objectives in relation to the SIU? Investment and Market

Dynamics Survey responses indicate that lack of liquidity and investor risk appetite are perceived as the most pressing barriers, with nearly half of respondents rating them as total or significant obstacles. In contrast, the availability of funds for investing is generally not seen as a major constraint – almost half of the respondents considered it to be no barrier. The availability of attractive investments also appears to be a minor concern, with no respondents identifying it as a total or significant barrier, and views evenly split between "small barrier," "no barrier," and "no opinion." These patterns suggest that while market sentiment and liquidity conditions pose challenges for some firms, structural investment opportunities are broadly available. Figure 54. Q6 How far have the following factors posed barriers to your firm achieving its business objectives in relation to the SIU? Cost and Compliance Regulatory compliance and the cost of

market data emerge as the most frequently cited barriers to firms achieving their business objectives in relation to the SIU. The cost of settlement and clearing also stand out, with 16 and 14 respondents rating them as at least a small barrier. In contrast, the cost of trading Page 156 of 195 Study on consolidation and reducing fragmentation in trading and post-trading infrastructures in Europe and the cost of safekeeping are more often seen as non-issues. The cost of corporate actions is notable for its even distribution across all response categories, suggesting mixed experiences among firms. Figure 55. Q7 How far have the following factors posed barriers to your firm achieving its business objectives in relation to the SIU? Operational Complexity The complexity of post-trade systems is the most frequently mentioned barrier to achieving business objectives concerning the SIU. No respondent viewed it as a total barrier, and 2 indicated no barrier, suggesting that while it is

widely acknowledged, it is not considered critical. The complexity of investing or operating across markets was rated as a small or significant barrier, making it the most broadly acknowledged concern. In contrast, the complexity of trading systems appears less problematic. Overall, operational complexity is a challenge, but its intensity varies – trading systems are seen as relatively manageable compared to post-trade and cross-market operations. Table 21. Q8 Are there any other factors that have posed a barrier to your organisation’s objectives in relation to the SIU? (Optional). Type of respondent Comments Market Makers / Brokers (own account trading/intermediaries) IFR capital requirements, intended to be more proportionate, remain closely tied to banking rules and are often more restrictive, driving investment firms out of the EU and reducing competitiveness. Investing Institution (investing its own funds primarily) Gatekeepers refuse to settle or link Bulgarian and CEE

securities, breaching CSDR obligations, with regulators failing to enforce rules. Private infrastructure policies often override EU regulations, creating discrimination and undermining SIU goals. Market Infrastructure Provider Lack of harmonised regulations across member states, especially in bankruptcy, contract law, investor protection, and taxation, creates legal uncertainty and high cross-border costs, obstructing a unified capital market. Market Makers / Brokers (own account trading/intermediaries) Regulatory complexity across markets, varying tax regimes, and high infrastructure and post-trade costs, including for market data. Asset Managers (Managing client assets as primary function) There is a shortage of professional portfolio managers. Market Infrastructure Provider Uncertainty around the SIU’s impact on the securities market infrastructure has delayed decision-making recently. Page 157 of 195 Study on consolidation and reducing fragmentation in trading and

post-trading infrastructures in Europe Type of respondent Custodians / General Clearing Members Comments Key barriers include fragmented post-trade infrastructure, limited interoperability among CSDs and CCPs, and divergent national regulations complicating cross-border operations. Additional challenges stem from inconsistent tax and legal frameworks and lacking a unified EU-level supervisor for capital markets infrastructure. Table 22. Q9 Do you have any additional comments or explanations you would like to provide regarding your answers in this section? (Optional). Type of respondent Comments Market Makers / Brokers (own account trading/intermediaries) Primary exchanges should compete by lowering market data, post-trade, and settlement frictions. This requires regulating data/connectivity costs, mandating post-trade interoperability, and integrating more CSDs into the T2S. Investing Institution (investing its own funds primarily) Post-trade infrastructure in the EU is

dominated by gatekeepers like ICSDs and certain national CSDs, creating high transaction costs, limited access, and discrimination, especially by national origin. Asset Managers (Managing client assets as primary function) Supervision is fragmented, with inconsistent standards across NCAs and financial sectors, hampering uniform oversight Asset Managers (Managing client assets as primary function) Reducing the number of CSDs is key to cutting settlement costs and delays. Stricter CSDR measures increase compliance burdens and divert focus from core settlement tasks. Market Makers / Brokers (own account trading/intermediaries) Nordic legal requirements for end-investor accounts, especially Finland’s nominee ban, hinder cross-border access, limit competition among CSDs and custodians, and constrain Finnish investors and issuers operating in other EU markets. Asset Managers (Managing client assets as primary function) Investor protection against fraudulent management in investee

companies is needed. Proposed solutions: 1) Streamlining regulations: targeted revision to key directives, 2) Structured coordination amongst NCAs, Custodians / General Clearing Members 3) Harmonised framework around tax, 4) Barrier reporting channel allowing for reporting of integration obstacles directly to the Commission, 5) Harmonised settlement finality protections across all EU member states (under a regulation, not a directive). Page 158 of 195 Study on consolidation and reducing fragmentation in trading and post-trading infrastructures in Europe Section 3: Capital Market Infrastructure Table 23. Q10 Do you have any additional comments or explanations you would like to provide regarding your answers in this section? (Optional). Type of respondent Comments Asset Managers (Managing client assets as primary function) There is insufficient oversight of exchange market data costs and licensing structures. Investing Institution (investing its own funds primarily) Some

major EU exchanges and CCPs informally discriminate against issuers from CEE countries by applying stricter, unofficial requirements, with limited recourse for affected issuers. Asset Managers (Managing client assets as primary function) Asset Managers (Managing client assets as primary function) Reducing CSDs, as in the US model, would lower settlement costs and improve speed. Stricter CSDR rules and penalties shift focus from settlement to compliance, increasing costs and delays. Market makers and dark pools obscure exchange activity, limiting visibility for investors despite real-time access. Page 159 of 195 Study on consolidation and reducing fragmentation in trading and post-trading infrastructures in Europe Section 4: Trading – Equity Figure 56. Q11 Does your organisation engage in equity trading activity, either directly or indirectly (e.g through outsourcing or acting on behalf of trading participants)? Figure 57. Q12 My organisation can buy or sell shares that are

in the main market indices in the desired quantity within the desired time frame. The responses show generally positive views across all country groups regarding the ability to buy or sell shares from main market indices in the desired quantity and timeframe. Group A (including Western and Northern EU countries) is the Page 160 of 195 Study on consolidation and reducing fragmentation in trading and post-trading infrastructures in Europe most confident, with over half (55%) stating "always" and another 23% stating "usually" – indicating strong market access. The view remains mostly positive in Group B (Nordic states and the UK). Groups C and D (Central and South-Eastern Europe) show more fragmented responses: in Groups C and D, only 14% and 9% respectively, responded “always”. Regional disparities remain, with more limited or inconsistent market access reported outside Group A’s more developed capital markets. Figure 58. Q13 My organisation uses a

variety of trading venues to buy or sell shares that are in the main market indices without market impact costs. Groups A and B generally report stronger agreement with the ability to use multiple trading venues without incurring market impact costs. This suggests a relatively efficient and accessible trading environment in those regions. By contrast, Group C shows more varied views, with lower rates of consistent access and 18% indicating no opinion, pointing to uncertainty or limited venue use. Group D exhibits the most fragmented pattern, indicating greater limitations in venue access or trading efficiency. While cross-border trading flexibility is robust in more developed markets (Groups A and B), it appears more constrained or uneven in Central and Southeastern Europe (Groups C and D). Page 161 of 195 Study on consolidation and reducing fragmentation in trading and post-trading infrastructures in Europe Figure 59. Q14 Please answer these questions about the tariffs for

trading fees and market data at equity trading venues. Table 24. Q15 Do you have any additional comments or explanations you would like to provide regarding your answers in this section? (Optional) Type of respondent Comments Asset Managers (Managing client assets as primary function) A governance body overseeing market data surveillance is missing. Market Makers / Brokers (own account trading/intermediaries) Clearing and settlement costs are larger frictions than trading fees. Page 162 of 195 Study on consolidation and reducing fragmentation in trading and post-trading infrastructures in Europe Section 5: Trading – Government Securities Figure 60. Q16 Does your organisation engage in the trading of government securities, either directly or indirectly (e.g through outsourcing or acting on behalf of trading participants)? Figure 61. Q17 My organisation can buy or sell government bonds in the desired quantity within the desired time frame. In Groups A, B, and D,

respondents expressed high confidence in their ability to transact in government bonds efficiently. Group C showed a more diverse response profile, suggesting slightly more uncertainty or uneven access. Page 163 of 195 Study on consolidation and reducing fragmentation in trading and post-trading infrastructures in Europe Figure 62. Q18 My organisation uses a variety of trading venues to buy or sell government bonds without market impact costs (e.g price movement caused by our own trading). Across all groups, responses to using multiple trading venues for government bond transactions without causing market impact show a relatively balanced pattern. Group A leads slightly, suggesting a relatively efficient and frictionless trading environment. Response distributions in Groups B, C, and D are nearly identical: 32% “always” and 32% “usually”. This reflects more uncertainty or less consistent access across these regions. While the ability to trade bonds without market impact

appears relatively established in all regions, confidence and consistency are slightly higher in Group A. In contrast, Groups B to D show more neutral or cautious sentiment, possibly pointing to regional disparities in bond market infrastructure or liquidity. Page 164 of 195 Study on consolidation and reducing fragmentation in trading and post-trading infrastructures in Europe Figure 63. Q19 Do you face problems in relation to the complexity of fee schedules for trading in the government securities market? Figure 64. Q20 Do you face problems in relation to the complexity of fee schedules for market data in the government securities market? Page 165 of 195 Study on consolidation and reducing fragmentation in trading and post-trading infrastructures in Europe Figure 65. Q21 If market data is a significant cost for your organisation in government securities markets, what action would you like to be taken? Table 25. Q22 Do you have any additional comments or explanations you

would like to provide regarding your answers in this section? (Optional). Type of respondent Comments Investing Institution (investing its own funds primarily) Bonds, including sovereign ones, are mainly traded OTC with all-in pricing. Market data sources like Bloomberg and Reuters cover all EU markets equally. EUR and USD bonds are liquid; local currency bonds have wider spreads and higher settlement costs. Asset Managers (Managing client assets as primary function) Liquidity is dispersed across platforms, making displayed and actual liquidity different. Harmonising trading venues would improve sovereign bond markets. Market Makers / Brokers (own account trading / intermediaries) Bond and derivatives markets work efficiently under current RFQbased frameworks. Liquidity pooling and venue connectivity are less relevant, as trades are typically bilateral with market makers, and MTFs serve more as channels than liquidity sources. Page 166 of 195 Study on consolidation and

reducing fragmentation in trading and post-trading infrastructures in Europe Section 6: Consolidated Tapes Figure 66. Q23 Please answer these questions about the introduction of consolidated tapes for equities and fixed income securities. Table 26. Q24 Do you have any additional comments or explanations you would like to provide regarding your answers in this section? (Optional). Type of respondent Comments Market Makers / Brokers (own account trading/intermediaries) A CT alone will not enforce best bid/offer matching but allows investors to question brokers and provides oversight tools for NCAs/ESMA. Investing Institution (investing its own funds primarily) Accessing all trading venues is challenging due to KYC/account opening hurdles and varying costs, limiting the practical impact of market data availability. Asset Managers (managing client assets as primary function) CT usefulness depends on timely data, affordable pricing, and practical specifications. Market Makers /

Brokers (own account trading/intermediaries) The anonymised pre-trade tape limits algorithm use and usefulness for Best Execution, which involves more than top-ofbook prices. The post-trade tape offers more value for transparency. For bonds, transparency supports informed decisions for the buy-side but has limited benefit for the sell-side. In illiquid markets, increased transparency may harm liquidity, especially under the new deferral regime, which should be recalibrated. Page 167 of 195 Study on consolidation and reducing fragmentation in trading and post-trading infrastructures in Europe Section 7: Post-trade – Clearing Figure 67. Q25 How do you clear trades in each region? Note: If your clearing arrangements differ by instrument (e.g cash equities, bonds and derivatives), please answer based on the most representative case. Page 168 of 195 Study on consolidation and reducing fragmentation in trading and post-trading infrastructures in Europe Figure 68. Q26 The CCP

clearing arrangements for the markets are "efficient" Note: By "efficient", we refer to the ability of CCP arrangements to handle large volumes, provide effective netting cycles, ensure timely collateral and margin call processes, and offer up-to-date risk reporting. Page 169 of 195 Study on consolidation and reducing fragmentation in trading and post-trading infrastructures in Europe Figure 69. Q27 The CCP clearing arrangements for the markets are costeffective Note: By cost-effective, we refer to whether the CCP services deliver good value for money, considering both the level of fees and the quality of service. Page 170 of 195 Study on consolidation and reducing fragmentation in trading and post-trading infrastructures in Europe Figure 70. Q28 Do you face problems in relation to the complexity of fee schedules for CCPs? Table 27. Q29 Please elaborate on the specific areas of complexity or suggest improvements (Optional). Type of respondent

Comments Market Makers / Brokers (own account trading/intermediaries) Interoperability across Europe should be mandated to improve integration. Asset Managers (Managing client assets as primary function) Fee structures based on margin and services (e.g, settlement) are too complex; simplifying them would enhance cost transparency. Custodians / General Clearing Members Clearing fee complexity arises from tiered pricing, segregation models, infrastructure fees, and collateral-related charges. Improvements should include mandated transparency (as under EMIR 3), standardised templates, flat-fee models for segregation types, pricing harmonisation across asset classes, bundled pricing, capped connectivity fees, margin simulation tools, pricing dashboards, and real-time risk feeds for settlement agents. Page 171 of 195 Study on consolidation and reducing fragmentation in trading and post-trading infrastructures in Europe Figure 71. Q30 Turning to the future, please answer these

questions about your preferred direction for the development of clearing for European securities. Table 28. Q31 If none of the above reflects your preferred solution, please explain your position below (Optional). Type of respondent Comments Asset Managers (Managing client assets as primary function) Harmonising CCPs both internally and externally would benefit the overall market. Market Makers / Brokers (own account trading/intermediaries) Nordic markets show that interoperable CCP clearing promotes competition, lowers costs, and drives innovation. Asset Managers (Managing client assets as primary function) Clearing and settlement processes should transition to blockchain technology. Table 29. Q32 Do you have any additional comments or explanations you would like to provide regarding your answers in this section? (Optional). Type of respondent Comments Investing Institution (investing its own funds primarily) Some countries still lack CCPs to guarantee and clear trades on

their stock exchanges. Asset Managers (Managing client assets as primary function) Improving efficiency in equity clearing would benefit the market. Custodians / General Clearing Members To boost CCP interoperability: clarify EMIR to allow broader product coverage; develop standardised agreements; promote cross-margining and netting; enhance ESMA’s supervisory role; incentivise adoption through discounts; and enforce open access rules under MiFIR. Page 172 of 195 Study on consolidation and reducing fragmentation in trading and post-trading infrastructures in Europe Section 8: Post-trade – Settlement and safekeeping Figure 72. Q33 How do you settle trades and safekeep equities in each region? The majority of respondents indicated that they settle and safekeep equities primarily through external custodian banks linked to a CSD, with this method being the most frequently selected option in Groups A, B, and C. Use of ICSDs (e.g Euroclear Bank or Clearstream Banking

Luxembourg) is also widespread, especially in Group C and Group A. In contrast, direct membership in CSDs is relatively limited, with only 1-4 responses per group. Use of CSD links is rare across all regions, suggesting limited operational reliance on cross-CSD connections. The data also reveal more mixed settlement approaches in Group A, where multiple methods appear more evenly distributed. Custodial relationships and ICSD access dominate, while direct or linked CSD access remains niche. Figure 73. Q34 How do you settle trades and safekeep fixed-income securities in each region? Similarly, most respondents reported settling and safekeeping fixed-income securities primarily via external custodian banks linked to a CSD. ICSDs such as Euroclear Bank or Clearstream Banking Luxembourg were widely used, particularly in Groups A and B. Unlike equities, direct membership in CSDs is slightly more prevalent for fixed-income, especially in Group D, the highest across Page 173 of 195 Study

on consolidation and reducing fragmentation in trading and post-trading infrastructures in Europe all groups for this method. Notably, no participants reported using CSD links for fixed-income settlement, and "not applicable" and "no opinion" responses were low and fairly stable across the board. These patterns indicate a stronger role for direct CSD access in bond markets, while external custodians and ICSDs remain the dominant channels. Figure 74. Q35 Settlement in the CSDs is efficient and cost-effective Page 174 of 195 Study on consolidation and reducing fragmentation in trading and post-trading infrastructures in Europe Figure 75. Q36 Processing of corporate actions is harmonised and efficient across the region. Page 175 of 195 Study on consolidation and reducing fragmentation in trading and post-trading infrastructures in Europe Figure 76. Q37 Calculation and collection of tax and processing of refunds is harmonised and efficient across the

region. Page 176 of 195 Study on consolidation and reducing fragmentation in trading and post-trading infrastructures in Europe Figure 77. Q38 Do you face problems in relation to the complexity of fee schedules for CSDs? Figure 78. Q39 Please answer these questions about the results of CSD consolidation, for example, within the Euroclear or Euronext groups. Page 177 of 195 Study on consolidation and reducing fragmentation in trading and post-trading infrastructures in Europe Figure 79. Q40 Turning to the future, what is your preferred direction for the development of settlement for European securities? Table 30. Q41 If none of the above reflects your preferred solution, please suggest a different option/recommendation. (Optional) Type of respondent Comments Market Makers / Brokers (own account trading/intermediaries) Address barriers identified by the European Post-Trade Forum (2017) by fully harmonising EU post-trade rules, ratifying the Hague and Geneva securities

conventions, expanding T2S to all CSDs, and enabling cross-currency settlement in coordination with nonEuro central banks. Market Makers / Brokers (own account trading/intermediaries) Favour either a group of competing CSDs or a central not-for-profit CSD. Competition requires revisiting the investor/issuer CSD model, centralising core functions like corporate actions and instrument data, and introducing a centralised regulator with a competition mandate. The new framework should decouple core CSD functions and allow for DLT integration, ensuring open and fair access across the EU. Page 178 of 195 Study on consolidation and reducing fragmentation in trading and post-trading infrastructures in Europe Figure 80. Q42 What is the ideal number of securities CSDs in Europe? Table 31. Q43 Do you have any additional comments or explanations you would like to provide regarding your answers in this section? (Optional). Type of respondent Comments Investing Institution (investing its

own funds primarily) No need to separate fixed income, equities, or funds in CSD services. Asset Managers (Managing client assets as primary function) Support for fewer CSDs and a central "hub CSD" handling interCSD settlement, corporate actions, and tax reclaims. Asset Managers (Managing client assets as primary function) Reducing CSD numbers would lower settlement costs and increase speed. Stricter CSDR rules raise costs and shift focus from settlement to penalty claims. Market Makers / Brokers (own account trading/intermediaries) Investors should have the choice between segregated and omnibus accounts. Mandated end-investor models strengthen local CSD monopolies and limit cross-border options. Asset Managers (Managing client assets as primary function) The main issue is the lack of full interoperability among CSDs, even after 10 years of T2S implementation. Page 179 of 195 Study on consolidation and reducing fragmentation in trading and post-trading

infrastructures in Europe Section 9. Legal and Regulatory Barriers Figure 81. Q44 Please indicate how far you agree or disagree with the following statements. There is a broad consensus that legal and regulatory fragmentation across EU Member States poses serious barriers to cross-border trading and post-trading. Most respondents (88%) agreed that such fragmentation hinders efficiency, with similarly strong agreement that differences in national implementation of EU regulations create operational or legal uncertainty (87% agree or strongly agree combined). Concerns also emerged regarding national competent authorities’ inconsistent enforcement, with 83% of respondents agreeing it hampers integration. Support is similarly strong for a greater role for ESMA or a centralised EU body in coordinating trading and post-trading infrastructure, with 68% agreeing or strongly agreeing. Page 180 of 195 Study on consolidation and reducing fragmentation in trading and post-trading

infrastructures in Europe Legal and structural issues remain prominent: for example, variations in securities law and gold-plating of EU rules were each identified by at least 84 of the respondents as barriers. Legal risks arising from investor protection divergence (52%) and cross-border collateral use uncertainty (64%) were also widely acknowledged. The only statement with significant hesitation was related to insolvency law divergences, where 61% expressed no opinion, possibly reflecting lower relevance or limited experience. Overall, the findings indicate a shared view that fragmentation in rulemaking, enforcement, and legal structures is a major impediment to efficient capital markets integration. Page 181 of 195 Study on consolidation and reducing fragmentation in trading and post-trading infrastructures in Europe Section 10. Competition and Institutional Architecture Figure 82. Q46 Please indicate how far you agree or disagree with the following statements. Respondents

strongly support increasing the role of EU institutions in promoting competition and overseeing market infrastructure consolidation. A clear majority (87%) agree or strongly agree that promoting competition should be added to ESMA’s objectives, and an identical share supports DG COMP playing a more active role in horizontal consolidation. Views are more mixed on vertical consolidation: 62% agree or strongly agree, 39% disagree or hold no opinion, indicating greater uncertainty or caution around vertical integration oversight. Meanwhile, 70% support encouraging European market infrastructure consolidation to develop "European Champions", although 20% express no opinion, reflecting a degree of ambivalence. Overall, the data Page 182 of 195 Study on consolidation and reducing fragmentation in trading and post-trading infrastructures in Europe suggest a strong appetite for EU-level intervention in competition and consolidation policy, especially for horizontal structures

and market diversity. Table 33. Q47 Do you have any additional comments or explanations you would like to provide regarding your answers in this section? (Optional). Type of respondent Market Makers / Brokers (own account trading/intermediaries) Comments Granting monopoly-like status to exchanges (e.g, Most Relevant Market) has led to excessive market data fees. Regulators should lower barriers to encourage competition, not reinforce monopolies. Asset Managers (Managing client assets as primary function) Consolidation should be guided by both market forces and targeted regulatory intervention. Market Makers / Brokers (own account trading/intermediaries) Consolidation will naturally result from fair competition and doesn’t require legislative enforcement. Market Infrastructure Provider Not about creating “champions,” but rather a natural outcome of a harmonised legal regime. Market Infrastructure Provider The private sector should drive competition and institutional

structure, while the public sector should be limited to setting the core regulatory rules. Page 183 of 195 Study on consolidation and reducing fragmentation in trading and post-trading infrastructures in Europe Section 11. Recommendations for the Future Figure 83. Q48 Please indicate how far you agree or disagree with the following principles for improving European capital market infrastructure. Respondents broadly support principles prioritising competition, harmonisation, and pragmatic progress in improving European capital market infrastructure. A majority (73%) agree that competition and user choice should precede scaledriven consolidation. Similarly, 91% support the harmonisation of securities laws and processes across Europe, with none disagreeing, signalling a strong alignment with the need for legal convergence. When asked about progressing rapidly, even if some countries are left behind, opinions are more divided – 50% agree, but 32% disagree, indicating a more

cautious stance toward uneven development. Views are also split on introducing an optional “28th” company law regime: while 50% support the idea, a combined Page 184 of 195 Study on consolidation and reducing fragmentation in trading and post-trading infrastructures in Europe 50% either disagree or hold no opinion, suggesting this proposal lacks consensus. Overall, the survey results reflect robust support for integration and user-focused infrastructure design, with measured caution around policy mechanisms that could deepen intra-EU divergence. Table 34. Q49 Do you have any additional comments or explanations you would like to provide regarding your answers in this section? (Optional). Type of respondent Comments Investing Institution (investing its own funds primarily) Harmonisation should be the ultimate objective. Market Makers / Brokers (own account trading/intermediaries) A 28th regime may help FMIs but not issuers or investors; Europe’s capital markets must work

for SMEs and start-ups across all regions. Market Infrastructure Provider Always apply international standards, e.g, LEI/vLEI/BIC for IDs, UTI for tracking, ISO 20022 for messaging. Page 185 of 195 Study on consolidation and reducing fragmentation in trading and post-trading infrastructures in Europe Annex 4: References AFM. (2022) Assessing the quality of execution on trading venues https://wwwafmnl Annunziata, F. (2022), Towards an EU Charter for the Protection of End Users in Financial Markets, EBI Working Paper Series 2022 no. 128 Aramian, F., & Comerton-Forde, C (2024a, October) Listing exchanges versus other lit venues: Price formation. University of Melbourne Aramian, F., & Comerton-Forde, C (2024b, September) Listing exchanges versus other lit venues: Liquidity and order book dynamics. University of Melbourne Aramian, F., & Nordén, L L (2020) High-frequency traders and single-dealer platforms SSRN https://ssrn.com/abstract=3738608 Aramian, F., &

Nordén, L L (2024) Costs and benefits of trading with stock dealers: The case of systematic internalizers. European Financial Management, 30(3), 1094–1124. https://doi.org/101111/eufm12327 Association for Financial Markets in Europe. (2024) DLT-Based Capital Market Report https://www.afmeeu Backe, H., & Rydberg, D (2023) Statistical modelling of price difference duration between limit order books: Applications in smart order routing (Master’s thesis). KTH Royal Institute of Technology. BETTER FINANCE (2024). Welcomes Progress on the Savings and Investments Union Press Release, at: https://betterfinance.eu BMLL Technologies. (2024, March) The rise of retail trading: The European perspective https://www.bmlltechcom/news/market-insight/the-rise-of-retail-trading-the-europeanperspective BMLL Technologies. (2025a) BMLL Market Lens: European liquidity maps https://www.bmlltechcom/news/market-insight/bmll-market-lens-liquidity-maps July 2025 BMLL Technologies. (2025b) Daily

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