On December 4, 2025, the Commission adopted a comprehensive package of measures designed to remove barriers and unlock the full potential of the EU single market for financial services.
This package includes a proposal to convert the Settlement Finality Directive (SFD) into a directly applicable Regulation (SFR). This move is part of the broader Savings and Investment Union (SIU) strategy aimed at creating a competitive, resilient, and innovation-friendly European economy.
The SFR proposal addresses long-standing fragmentation in post-trade infrastructures by harmonising rules on settlement finality across the EU. It also introduces technological neutrality, paving the way for Distributed Ledger Technology (DLT) and tokenised assets to operate under clear legal frameworks.
Settlement finality - the point at which a payment or securities transfer becomes irrevocable - is critical for financial stability. Under the current Directive, Member States have implemented rules differently, creating legal uncertainty and operational risk for cross-border transactions. This fragmentation increases costs and complexity for market participants.
By replacing the Directive with a Regulation, the EU aims to:
- Ensure uniform application of settlement finality rules across all Member States.
- Reduce systemic risk linked to insolvency in payment and securities settlement systems.
- Support innovation by clarifying how new technologies like DLT fit into the legal framework.
- Enhance transparency through a central ESMA database of designated systems.
Key Highlights of the Proposal
- Direct applicability: No more divergent national transpositions—one rulebook for all.
- Expanded scope: Includes non-bank payment service providers and DLT-based systems.
- Clear definitions: Harmonised concepts for “system,” “participant,” “transfer order,” and “collateral.”
- Conflict-of-law clarity: Simplifies cross-border operations and reduces compliance costs.
- Centralised transparency: ESMA will publish up-to-date information on designated systems.
- Protection for third-country participation: Harmonised registration regime for systems outside the EU.
Next steps
The proposals must now be negotiated and approved by the European Parliament and the Council. These components are interconnected and together form a cohesive set of reforms essential for establishing a genuine single market across the entire investment chain. Maintaining the unity of the package is crucial. The Commission is dedicated to collaborating closely with the European Parliament, Member States, and other stakeholders to ensure the swift and effective implementation of these measures.
Source: MLex / EC Press Release
Write a comment