European Capital Markets Regulation: Key Updates for October 2025

MiFID III / MiFIR II: ESMA’s Second Statement on Transition

On October 10, 2025, the European Securities and Markets Authority (ESMA) published a second statement on the application of revised MiFID II and MiFIR provisions following legislative amendments adopted in 2024. The first statement was published in March 2024, and the second statement complements previous clarifications.​

Key provisions of ESMA’s statement:

Market participants are expected to comply with revised MiFID II/MiFIR provisions regardless of potential delays in the European Commission’s adoption of delegated and implementing acts. As a general rule, revised MiFID II provisions apply when relevant changes are transposed into national law.​

ESMA provides practical guidance on:

• Commodity derivatives and derivatives on emission allowances — position management and position reporting​

• Systematic internaliser (SI) regime — updated quoting requirements​

• Single volume cap mechanism (VCM) — replacing the double volume cap​

• Revised transparency rules for bonds, structured finance products, emission allowances, and equity instruments​

ESMA also published an amended version of its manual on pre-trade and post-trade transparency.​

Member States must transpose the MiFID III Directive by September 28, 2025.​

Single Volume Cap (VCM): A New Era of Trading Limits

In October 2025, ESMA introduced the transition from the double volume cap mechanism (DVCM) to the single volume cap mechanism (VCM) according to changes introduced by the MiFIR Review.​

The new VCM limits 7% of trading volume under the reference price waiver in the EU compared to total aggregated trading volume in the EU over the last 12 months for each equity and equity-like financial instrument. If the limit is exceeded, trading venues must suspend the use of the waiver for the concerned instrument for a period of three months.​

Trading venues must base their decision to suspend on data published by ESMA on the dedicated VCM webpage. The first publication of calculation results occurred on October 9, 2025.​

To reduce reporting burden, future VCM calculations will be based on transaction reporting data collected by National Competent Authorities (NCAs). The DVCM reporting system will be decommissioned in January 2026.​

Prudential Requirements for Investment Firms: EBA and ESMA Recommendations

On October 15, 2025, the European Banking Authority (EBA) and ESMA published a joint report with technical advice to the European Commission on the prudential framework in the Investment Firms Regulation (IFR) and Investment Firms Directive (IFD).​

EBA and ESMA propose limiting significant changes to the framework, which has proven fit-for-purpose, as confirmed by stakeholder feedback during joint consultations. The report highlights areas where alignment with the banking framework would be beneficial and identifies a need to improve definitions, calculation methodologies, and threshold monitoring.​

CRR3: A New Era of Capital Requirements for Banks

On January 1, 2025, the Capital Requirements Regulation III (CRR3) entered into force in the European Union. This represents one of the most significant changes in EU banking regulation in recent years, implementing the final elements of Basel III.​

Key CRR3 innovations:

Output floor of 72.5%. The limit establishes how much banks can lower capital requirements using internal models, ensuring greater consistency between institutions.​

Market risk and FRTB. While institutions continue to use current (pre-FRTB) methodologies to calculate their own funds requirements for market risk under CRR2, many institutions are running FRTB calculations in parallel to prepare for the transition.​

Operational risk overhaul. The new Standardised Approach (SA-OR) replaces previous methodologies, reducing variability in capital requirements.​

Credit risk adjustments. Changes to the Standardised Approach (SA-CR) and Internal Ratings-Based (IRB) models impose stricter rules on risk weights, collateral treatment, and exposure classifications.​

The first reporting under new CRR3 requirements for solvency and leverage ratios was extended from May 12, 2025, to June 30, 2025.​

EU Securitisation Reform: Simplification and Stimulation

On June 17, 2025, the European Commission published a legislative package on the reform of the EU securitisation framework. Proposals include amendments to the EU Securitisation Regulation, Capital Requirements Regulation (CRR) for banks, Liquidity Coverage Ratio (LCR) Delegated Regulation, and Solvency II Delegated Regulation.​

Key changes in the legislative package:

Reduction of reporting fields by at least 35%. Reducing operational costs for issuers and investors through simplified due diligence and transparency requirements.​

Simplified due diligence requirements. Investors will no longer need to verify certain information when the selling party is based and supervised in the EU, as competent authorities are already responsible for checking compliance with these requirements.​

Homogeneity for STS securitisations. Pools composed of 70% SME loans will now be considered homogenous, facilitating cross-border deals and SME financing.​

Minimum risk weights. The legislative package introduces minimum risk weight floors at 7% for STS securitisations and 12% for non-STS securitisations.​

The European Parliament and Council of the EU are currently considering the legislative proposals. The ECON Committee rapporteur plans to publish a draft report with proposed amendments in December 2025 or January 2026. Final agreement between the three institutions is expected in the second half of 2026.​

Savings and Investments Union: EC’s New Strategy

On March 19, 2025, the European Commission published the Savings and Investments Union (SIU) strategy. The SIU aims to create better financial opportunities for EU citizens while enhancing the financial system’s capability to connect savings with productive investments.​

Four strands of work of the SIU:

Citizens and Savings. Encouraging retail participation in capital markets through the creation of Savings and Investment Accounts (SIAs) with tax benefits.​

Investments and Financing. Facilitating company access to financing through developed capital markets, especially for SMEs and innovative companies.​

Integration and Scale. Removing fragmentation in EU capital markets, which reduces costs, increases liquidity, and encourages cross-border investment.​

Efficient Supervision in the Single Market. Strengthening coordination between national and European supervisory authorities.​

On September 30, 2025, the European Commission published a Recommendation on Savings and Investment Accounts (SIAs). The Recommendation proposes that Member States introduce accounts with favorable tax treatment, for example by delaying taxation on income used to feed the account and the return on this investment until payout to the investor.​

The SIU aims to mobilize €10 trillion in savings of European citizens for investments in EU strategic priorities.​

Transition to T+1 Settlement: Approaching Global Standards

On February 12, 2025, the European Commission published a legislative proposal to shorten the settlement cycle in the EU from two days (T+2) to one day (T+1) for transactions in transferable securities executed on trading venues.​

In June 2025, the Council of the EU and the European Parliament reached political agreement on the proposal. Final adoption is expected shortly, after which the regulation will enter into force 20 days after publication in the EU Official Journal.​

Application date: October 11, 2027.​

Implementation timeline:

• Q3 2025: finalizing the definition of solutions to technical challenges​

• End of 2026: implementing solutions​

• October 11, 2027: testing solutions and launching T+1​

Expected benefits:

Enhanced efficiency and resilience. Halving transaction processing time significantly reduces execution risk — the risk of one party defaulting before settlement.​

Improved liquidity. Faster transaction settlement gives investors quicker access to their funds, allowing for immediate reinvestment.​

Elimination of costs associated with misaligned settlement cycles between the EU and other jurisdictions.​

China, India, the United States, Mexico, and Canada have already shortened their settlement period to a maximum of T+1. The United Kingdom, Switzerland, Japan, and Australia are also expected to follow suit.​

ESG Risks in Banking Regulation: CRD6

The Capital Requirements Directive VI (CRD6), published alongside CRR3 on June 19, 2024, contains several revised rules regarding supervisory tools, particularly access to the EU market for third-country banks, and enshrines requirements to include ESG-related risks in banks’ governance and risk management in EU law.​

EU Member States must transpose CRD6 requirements into national law for application by January 11, 2026.​

This means banks are required to systematically identify, disclose, and manage risks arising from environmental, social, and governance (ESG) factors as part of their risk management framework.​

Commodity Markets: EU Carbon Markets Functioning Smoothly

On October 22, 2025, ESMA published its annual market report on EU carbon markets. Looking at data for 2024, ESMA has not identified any significant issues in the integrity or transparency of EU carbon markets.​

Emission allowance auctions and secondary markets trading dynamics remain largely unchanged, with the market organized in a way that facilitates the flow of allowances from financial intermediaries to non-financial firms with compliance obligations. The analysis of trading and derivatives positions in the non-financial sector further highlights that the market accommodates different acquisition strategies, reflecting the different needs and capabilities of participants.​

Conclusion

October 2025 became a period of intense regulatory activity in the European Union in the area of capital markets, investments, and commodity markets. Updates to MiFID II/MiFIR, introduction of CRR3, securitisation reform, the Savings and Investments Union strategy, transition to T+1 settlement, and integration of ESG risks into banking regulation create a new regulatory ecosystem aimed at enhancing the competitiveness, resilience, and integration of European financial markets in the context of global challenges.

Legal Disclaimer: This article is for informational and analytical purposes only and does not constitute legal advice, investment advice, or recommendations for making any financial or legal decisions. The authors are not responsible for any decisions made based on this material. For specific recommendations on regulatory, legal, or investment matters, it is recommended to consult qualified professionals.