ESMA's 2025 Work Program: A Comprehensive Guide for Financial Firms Part One

The European Securities and Markets Authority (ESMA) has set an ambitious agenda for 2025, with a work program that covers a wide range of priorities and actions impacting financial firms across the EU. ESMA focuses on ensuring a robust, transparent, and resilient financial ecosystem, from bolstering market integrity and investor protection to embracing technological innovation and sustainable finance.

Part one of this blog post covers ESMA priorities in the following areas: 

• Central Clearing Counterparties (CCPs): Strengthening resilience and safeguarding financial stability through enhanced supervision, stress testing, and crisis preparedness.

• Data Reporting Service Providers (DRSPs): Ensuring data quality and market transparency by promoting high standards for data reporting and operational resilience.

• Trade Repositories (TRs): Enhancing data quality and security through ongoing supervision, cybersecurity reviews, and compliance with EMIR REFIT.

• Trading and Post-Trading: Navigating market integrity, transparency, and regulatory change by complying with MiFID II/MiFIR and EMIR requirements, adapting to revised transparency rules, and understanding the implications of Consolidated Tape Providers (CTPs).

• Market Abuse: Staying ahead of market abuse in a digital age by ensuring compliance with MAR and SSR, addressing the impact of social media, and implementing robust surveillance mechanisms for algorithmic trading.

• Central Securities Depositories (CSDs): Ensuring efficiency and resilience in a changing landscape by complying with CSDR requirements, preparing for a potential shortening of the settlement cycle, and maintaining high efficiency.

  
  

ESMA's 2025 Focus on EU CCPs: Strengthening Resilience and Safeguarding Financial Stability

Central Clearing Counterparties (CCPs) form the backbone of the financial system, mitigating counterparty risk and promoting stability in derivatives markets. Recognising their systemic importance, ESMA's 2025 work program prioritises the robust supervision of EU CCPs, aiming to enhance their resilience and safeguard financial stability. This blog post thoroughly examines ESMA's comprehensive approach to CCP oversight and outlines the critical implications for CCPs operating within the EU.

ESMA's Core Objectives for EU CCPs

ESMA's overarching goals for the supervision of EU CCPs are to:

• Contribute to broader objectives: Support effective markets, financial stability, supervision, technological innovation, and data usage about EU CCPs.

• Assess CCP resilience: Through stress tests and an enhanced supervisory database, assess CCPs' resilience to adverse market conditions and identify potential risks to financial stability.

• Develop new standards: Following adopting the EMIR 3 review, a substantial number of Regulatory Technical Standards (RTS) related to EU CCPs will be developed.

• Promote supervisory convergence: Promote consistent supervisory practices across the EU for CCPs through opinions, guidance, and participation in supervisory colleges.

• Enhance crisis preparedness: Conduct regular fire drills to enhance crisis preparedness and coordinate the participation of EU CCPs in global fire drills.

• Maintain the CCP single rulebook: Monitor and update the CCP single rulebook under EMIR and the CCP Recovery and Resolution Regulation (CCP RRR) to ensure CCP resilience.

ESMA's Multi-Faceted Supervisory Approach

To achieve these objectives, ESMA will employ a range of supervisory tools and strategies:

• Ongoing monitoring and supervision: Maintain and update the CCP single rulebook, provide guidance, participate in supervisory colleges, and conduct risk assessments.

• Stress testing: Conduct regular stress tests to assess CCP resilience and incorporate new risks, such as operational and climate risks.

• Enhanced data analysis: Strengthen analytical capabilities to identify vulnerabilities in the clearing ecosystem using data from CCPs, NCAs, and other authorities.

• Central database: Implement a central database for CCPs to submit data, facilitating information sharing and supervisory processes.

• Peer reviews: Conduct annual peer reviews on the supervision of EU CCPs, focusing on recovery plans in 2025.

• EMIR 3 implementation: Develop and implement a range of RTS under the EMIR 3 review, covering areas such as the Active Account Requirement (AAR), supervisory procedures, margin requirements, and interoperability.

Implications for EU CCPs

• Enhanced Supervisory Scrutiny: Expect ongoing monitoring, stress testing, and participation in supervisory colleges. CCPs should be prepared for increased engagement with ESMA and national competent authorities (NCAs).

• EMIR 3 Compliance: Prepare for new requirements and RTS under the EMIR 3 review, including those related to the AAR, margin transparency, and interoperability. CCPs must proactively analyse the implications of EMIR 3 and adapt their operations accordingly.

• Recovery Planning: Ensure that recovery plans are robust and meet ESMA's expectations, as this will be a crucial focus of the 2025 peer review. CCPs should review and strengthen their recovery plans to demonstrate resilience in potential crises.

• Data Reporting: Comply with data reporting requirements and utilise the central database for submissions and information sharing. CCPs must ensure the accuracy and timeliness of their data submissions to ESMA.

• Crisis Preparedness: Participate in fire drills and enhance crisis preparedness measures. CCPs should proactively engage in ESMA's initiatives to strengthen crisis preparedness and ensure operational continuity in times of stress.

ESMA's 2025 Vision for Data Reporting Service Providers: Ensuring Data Quality and Market Transparency

Data Reporting Service Providers (DRSPs) play a critical role in today's financial markets, facilitating transparency and enabling adequate supervision. Collecting and disseminating trade data provides valuable insights into market activity and helps regulators maintain fair and orderly markets. ESMA's 2025 work program oversees DRSPs to ensure data quality and operational resilience. This blog post provides a detailed look at ESMA's plans for the DRSP sector and outlines the critical implications for firms operating in this space.

ESMA's Core Objectives for DRSPs

ESMA's overarching goals for the data reporting services sector are to:

• Contribute to broader objectives: Support effective markets, financial stability, supervision, technological innovation, and data usage within the data reporting services sector.

• Ensure high-quality data: Ensure the quality of transaction data provided by Approved Reporting Mechanisms (ARMs) to National Competent Authorities (NCAs) and data published by Approved Publication Arrangements (APAs).

• Supervise DRSPs: Directly supervise certain DRSPs (ARMs and APAs) and oversee the supervision of others by NCAs.

• Promote data quality and operational resilience: Ensure DRSPs meet high data quality and operational resilience standards, including compliance with the Digital Operational Resilience Act (DORA).

ESMA's Supervisory Approach for 2025

To achieve these objectives, ESMA will utilise a range of supervisory tools and strategies:

• Annual assessment: Conduct an annual evaluation of DRSPs to determine which ones fall under ESMA's direct supervision.

• Risk-based supervision: Supervise DRSPs using a risk-based, outcome-focused, and data-driven approach.

• Focus on key areas: Focus on DRSPs' governance, internal controls, IT systems, information security, and compliance with DORA.

• Assess group strategy: Assess the groups' strategies to which DRSPs belong and the potential impacts of group-level decisions.

• Publish data quality report: Publish a report on the quality and use of data to demonstrate the effectiveness of supervisory efforts.

• Authorise the first Consolidated Tape Provider (CTP): Launch the selection and authorisation process for the first CTP for bonds in early 2025 and equities/ETFs in mid-2025.

Key Implications for DRSPs

• Direct Supervision: ARMs and APAs should expect ongoing scrutiny and supervision from ESMA. This includes regular assessments of their operations, data quality, and compliance with regulatory requirements.

• Data Quality and Security: Prioritize data quality, security, and compliance with relevant regulations, including MiFIR and DORA. DRSPs must implement robust data quality assurance processes and security measures to protect sensitive information.

• Operational Resilience: DRSPs must ensure operational resilience and have adequate governance, internal controls, and IT systems arrangements. They must also demonstrate their ability to withstand disruptions and maintain operational continuity.

• Group Strategy Alignment: If the DRSP is part of a larger group, ensure that the DRSP's strategy aligns with the group's overall strategy and consider the potential impacts of group-level decisions.

• Consolidated Tape (CT) Development: Be aware of the upcoming authorisation of CTPs, which may impact the data reporting landscape. DRSPs should proactively assess the potential implications of CTPs for their business models and operations.

ESMA's 2025 Spotlight on Trade Repositories: Heightened Scrutiny for Data Quality and Security

Trade Repositories (TRs) are vital in ensuring transparency and mitigating risk in financial markets. As central hubs for collecting and maintaining records of derivatives and securities financing transactions, they provide regulators with crucial data for monitoring market activity and identifying potential vulnerabilities. ESMA's 2025 work program strongly emphasises supervising TRs, aiming to enhance data quality, operational resilience, and cybersecurity. This blog post provides a comprehensive overview of ESMA's plans for the trade repository sector and outlines the critical implications for firms operating in this space.

ESMA's Core Objectives for Trade Repositories

ESMA's overarching goals for the trade repository sector are to:

• Contribute to broader objectives: Support effective markets, financial stability, supervision, technological innovation, and data usage within the trade repository sector.

• Enhance data quality: Continue and enhance EU-wide data quality activities to ensure high-quality, available, and usable EMIR/SFTR data.

• Supervise TRs: Supervise TRs using a risk-based, outcome-focused, and data-driven approach.

• Ensure data quality and operational resilience: Focus on ensuring high data quality standards and operational resilience of TRs, including compliance with DORA.

ESMA's Supervisory Approach for 2025

To achieve these objectives, ESMA will utilise a range of supervisory tools and strategies:

• Ongoing supervision: Conduct ongoing supervision of TRs, including monitoring their governance, internal controls, and compliance with EMIR REFIT requirements.

• Focus on critical areas: Ensure effective governance, internal control frameworks, and compliance with DORA requirements, particularly cybersecurity.

• Follow up on cybersecurity reviews: Follow up on any concerns arising from the 2024 cybersecurity reviews of TRs and their group strategies.

• Monitor data reconciliation and verification: Focus supervisory activities on monitoring the correct reconciliation and verification of EMIR/SFTR data.

• Publish data quality report: Publish a report on the quality and use of EMIR/SFTR data to show the effectiveness of supervisory efforts.

• Assess SFTR efficiency: Publish a report on the efficiency of the Securities Financing Transactions Regulation (SFTR).

Implications for Trade Repositories

• Direct Supervision: Expect ongoing scrutiny and supervision from ESMA, focusing on data quality, operational resilience, and cybersecurity. TRs should be prepared for regular assessments and on-site inspections.

• DORA Compliance: Ensure compliance with DORA requirements, particularly cybersecurity and operational resilience. TRs need to demonstrate their ability to withstand disruptions and maintain operational continuity.

• EMIR REFIT Implementation: Continue implementing EMIR REFIT's requirements, including reporting and risk mitigation standards updates.

• Data Reconciliation and Verification: Accurate data reconciliation and verification processes must be prioritised to meet ESMA's expectations. TRs must ensure the accuracy and completeness of reported data.

• Cybersecurity Framework: Maintain a robust cybersecurity framework and address any concerns raised by ESMA during cybersecurity reviews. TRs should proactively invest in cybersecurity measures to protect sensitive data and prevent cyberattacks.

ESMA's 2025 Agenda for Trading and Post-Trading: Navigating Market Integrity, Transparency, and Regulatory Change

Trading and post-trading activities form the core of financial markets, and ensuring their integrity and transparency is crucial for maintaining investor confidence and economic stability. ESMA's 2025 work program sets a clear agenda for the trading and post-trading landscape, focusing on market integrity and transparency and implementing critical regulations like MiFID II/MiFIR and EMIR. This blog post provides a comprehensive overview of ESMA's plans and outlines the essential implications for trading firms operating within the EU.

ESMA's Core Objectives for Trading and Post-Trading

ESMA's overarching goals for the trading and post-trading are to:

• Contribute to broader objectives: Support effective markets, financial stability, supervision, technological innovation, and data usage in the trading and post-trading.

• Monitor market developments: Monitor developments in secondary markets, including commodity derivative markets and post-trading activities, to ensure orderly markets.

• Foster supervisory convergence: Promote consistent supervision of MiFID II/MiFIR requirements across the EU through guidance and information sharing.

• Promote transparency: Issue opinions on pre-trade waivers and position limits for commodity derivatives.

• Finalise MiFIR review: Finalize the follow-up work to the MiFIR review, including revising trade transparency rules, transaction reporting, and order book data requirements.

• Monitor carbon market: Monitor the integrity and transparency of the European carbon market and make recommendations to the EC and co-legislators.

• Oversee clearing obligation: Monitor the implementation of the clearing obligation and risk mitigation techniques for OTC derivatives.

• Review EMIR technical standards: Review or develop new technical standards related to the clearing obligation under EMIR.

ESMA's Action Plan for 2025

To achieve these objectives, ESMA has outlined the following actions:

• Ongoing monitoring and guidance: Provide guidance and tools to promote supervisory convergence, monitor compliance with clearing and trading obligations, and assess the appropriateness of clearing thresholds.

• International cooperation: Engage in global work, including monitoring and reporting on equivalence.

• Opinions and assessments: Issue opinions on position limits, pre-trade transparency waivers, and third-country venue arrangements.

• Common Supervisory Actions (CSAs): Conduct CSAs, such as the one on pre-trade controls, to promote supervisory convergence.

• Selection of CTPs: Conduct the selection procedure for establishing Consolidated Tape Providers (CTPs) for bonds, shares, and ETFs.

• EMIR 3 implementation: Develop RTS on clearing thresholds and post-trade risk reduction services under EMIR 3.

• MiFIR updates: Develop or revise RTS and Implementing Technical Standards (ITS) on various aspects of MiFIR, including non-equity transparency, circuit breakers, systematic internaliser notification, and double volume caps.

Implications for Trading Firms

• MiFID II/MiFIR Compliance: Ensure compliance with MiFID II/MiFIR requirements, including trade transparency, transaction reporting, and best execution. Firms must stay abreast of the revised rules and implement trading practices and systems changes.

• EMIR Compliance: Comply with EMIR requirements, including the clearing obligation and risk mitigation techniques for OTC derivatives. This includes staying informed about the clearing thresholds and ensuring compliance with risk mitigation standards.

• Pre-Trade Controls: ESMA conducts a CSA on this topic, and firms should review and strengthen their pre-trade controls proactively to prevent erroneous orders and market abuse.

• Transparency Requirements: Adapt to revised transparency requirements for equity and non-equity instruments, including OTC derivatives. This may require adjustments to reporting systems and procedures to ensure compliance with the new rules.

• Position Limits: Be aware of ESMA's opinions on position limits for commodity derivatives. Firms trading in commodity derivatives should monitor ESMA's publications and adhere to position limits to avoid market distortions.

• CTPs: Understand the implications of the upcoming CTPs for market data and transparency. Firms should prepare for the introduction of CTPs and assess how the increased availability of market data will impact their trading strategies and operations.

ESMA's 2025 Plan for Market Integrity: Staying Ahead of Market Abuse in a Digital Age

Maintaining market integrity is paramount for ensuring investor confidence and the smooth functioning of financial markets. ESMA's 2025 work program strongly emphasises upholding market integrity by overseeing compliance with the Market Abuse Regulation (MAR) and the Short Selling Regulation (SSR). This blog post provides a comprehensive overview of ESMA's multifaceted approach to combating market abuse and outlines the key implications for firms operating within the EU.

ESMA's Core Objectives for Market Integrity

ESMA's overarching goals for market integrity are to:

• Contribute to broader objectives: Support effective markets, financial stability, supervision, technological innovation, and data usage in the context of market integrity.

• Monitor market developments and short-selling activity to identify and address potential threats to market integrity.

• Promote supervisory convergence: Ensure consistent supervision of MAR and SSR across the EU through guidance, case discussions, and coordination of supervisory actions.

• Address social media impact: Focus on social media's impact on market surveillance and integrity, potentially revising guidance on this topic.

• Identify new forms of market abuse: Monitor the implementation of MAR to identify new forms of market abuse and threats to market integrity.

• Implement Listing Act amendments: Continue working on regulatory and supervisory convergence measures related to the Listing Act amendments to MAR.

• Oversee accepted market practices (AMPs): Monitor the deployment of AMPs, deliver opinions on new or revised AMPs, and potentially update its opinion on AMPs for liquidity contracts.

• Promote STORs convergence: Produce an annual report on applying the STORs regime to contribute to supervisory convergence in suspicious transaction and order reports (STORs).

• Monitor algo-trading trends: Liaise with NCAs to understand trends and developments in algorithmic trading and their implications for market surveillance.

ESMA's Action Plan for 2025

To achieve these objectives, ESMA has outlined a comprehensive action plan:

• Ongoing monitoring and guidance: Monitor market developments, guide MAR and SSR, and coordinate supervisory actions with NCAs.

• Social media guidance: Potentially revise guidance on the impact of social media on market abuse, addressing the challenges posed by information dissemination and potential manipulation through online platforms.

• Listing Act implementation: Implement regulatory and supervisory convergence measures related to the Listing Act amendments to MAR, ensuring consistent application of the updated rules.

• AMP oversight: Monitor AMPs, deliver opinions on new or revised AMPs, and update its opinion on AMPs for liquidity contracts, promoting best practices and market transparency.

• STORs report: Produce an annual report on applying the STORs regime across the EU, fostering convergence and enhancing the effectiveness of STORs in detecting market abuse.

• Algo-trading monitoring: Liaise with NCAs to monitor trends and developments in algorithmic trading and address the challenges and risks associated with this evolving technology.

Implications for Firms

• MAR and SSR Compliance: Ensure compliance with MAR and SSR, including rules related to insider dealing, market manipulation, and short selling. Firms must have robust systems and controls to prevent and detect market abuse.

• Social Media Usage: Be mindful of social media's impact on market abuse and adhere to ESMA's guidance. Firms should implement clear policies and procedures regarding employees' use of social media and ensure that any public disclosures comply with MAR.

• Listing Act Compliance: Comply with the Listing Act amendments to MAR, particularly those related to market abuse. Firms must stay informed about the updated rules and adapt their compliance programs accordingly.

• Adherence to AMPs: Firms should adhere to ESMA's opinions and guidance on AMPs, including those related to liquidity contracts. They should also regularly review and update their practices to align with ESMA's recommendations.

• STORs Reporting: Comply with STORs reporting requirements and ensure the quality and timeliness of reports. Firms need to have robust systems in place to identify and report suspicious transactions and orders.

• Algo-Trading Surveillance: Develop robust surveillance mechanisms for algorithmic trading activities to detect and prevent market abuse. Firms engaged in algorithmic trading should implement sophisticated surveillance tools and procedures to mitigate the risks of market manipulation.

ESMA's 2025 Agenda for Central Securities Depositories: Ensuring Efficiency and Resilience in a Changing Landscape

Central Securities Depositories (CSDs) are critical to the financial market infrastructure, ensuring the safe and efficient settlement of securities transactions. ESMA's 2025 work program underscores the importance of CSDs by focusing on their oversight, aiming to enhance their operational efficiency, resilience, and compliance with the Central Securities Depositories Regulation (CSDR). This blog post provides a detailed overview of ESMA's plans for the CSD sector and outlines the critical implications for CSDs operating within the EU.

ESMA's Core Objectives for CSDs

ESMA's overarching goals for the CSD sector are to:

• Contribute to broader objectives: Support effective markets, financial stability, supervision, technological innovation, and data usage about CSDs.

• Participate in CSD colleges: Participate in colleges of supervisors for CSDs whose activities are deemed substantially necessary in multiple member states.

• Recognise third-country CSDs: Recognize third-country CSDs and monitor their compliance with recognition decisions.

• Shorten settlement cycle: Work towards shortening the settlement cycle in the EU, following up on the 2024 report on this topic.

• Monitor settlement efficiency: Monitor CSDs' settlement efficiency and internalisation of settlements at custodians.

• Calculate indicators: Calculate indicators to determine the most relevant settlement currencies and the substantial importance of CSDs for host member states.

• Manage third-country CSD notifications: Receive notifications from third-country CSDs providing services in the EU.

• Develop standards and guidance: Provide technical advice, review, or develop new technical standards and guidelines related to CSDR.

ESMA's Action Plan for 2025

To achieve these objectives, ESMA has outlined the following actions:

• Ongoing monitoring and guidance: Provide guidance on CSDR, participate in CSD colleges, monitor settlement efficiency, and manage third-country CSD notifications.

• Shorten settlement cycle: Actively participate in preparatory work and coordination with stakeholders to shorten the settlement cycle.

• Calculate indicators: Annually calculate indicators to determine relevant settlement currencies and the substantial importance of CSDs.

• Develop technical standards: Develop Regulatory Technical Standards (RTS) and Implementing Technical Standards (ITS) on various aspects of CSDR, including settlement discipline, tools to improve settlement efficiency, review and evaluation procedures, information to be notified by third-country CSDs, and deferred settlement.

• Provide technical advice: Provide technical guidance to the European Commission on the scope of settlement discipline.

Implications for CSDs

• Supervisory College Participation: If activities are deemed substantially important in multiple member states, be prepared to participate in supervisory colleges. This requires active collaboration and information sharing with ESMA and other NCAs.

• Shortened Settlement Cycle: Prepare for a potential shortening of the settlement cycle in the EU, which may require operational adjustments. CSDs should assess the potential impact of a shortened settlement cycle on their systems, processes, and resources.

• Settlement Efficiency: Maintain high settlement efficiency and address any concerns raised by ESMA's monitoring activities. CSDs need to continuously optimise their operations to ensure efficient and timely settlement of transactions.

• Third-Country CSD Recognition: Third-country CSDs providing services in the EU should be prepared to comply with recognition requirements and ESMA's monitoring. This includes adhering to CSDR rules and complying with ESMA's supervisory expectations.

• CSDR Compliance: Ensure compliance with CSDR requirements, including those related to settlement discipline and reporting. CSDs need to have robust compliance programs in place to meet the evolving regulatory standards.

Adapting to the Evolving CSD Landscape

ESMA's 2025 agenda for CSDs emphasises the importance of operational efficiency, resilience, and regulatory compliance in ensuring the smooth functioning of securities markets. By proactively addressing these implications, CSDs can demonstrate their commitment to market integrity, investor protection, and financial stability.

Navigating the Future of EU Finance: ESMA's 2025 Roadmap

ESMA's 2025 work program clearly shows the evolving regulatory landscape for financial firms in the EU. ESMA is setting the stage for a more robust, transparent, and resilient financial ecosystem by prioritising market integrity, investor protection, sustainable finance, and technological innovation.

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