The European post-trade market has long been characterised by a high degree of fragmentation. This situation is the result of historical developments, when capital markets were formed mainly at national level and each country developed its own legal, technological and organisational frameworks. The result is differences in regulation, technology and available liquidity, which still affect the functioning of the European capital market. Since full harmonisation of company law in Europe is not realistic, attention is mainly focused on integration in terms of liquidity and efficient cooperation between market infrastructures.
A significant source of fragmentation is the large number of central depositories operating in Europe. Although the European Commission has previously indicated the possibility of their consolidation, the depositories themselves point out that a deep and liquid equity market cannot be achieved by simply merging infrastructures. A more effective way is to strengthen cooperation and interconnection between them. In this context, the common TARGET2-Securities infrastructure has played an important role, having previously contributed to the removal of some of the technological barriers to trade settlement. However, discussions continue on further technical integration through interoperability, which would allow the creation of a network of interconnected depositories operating on a common open-access platform, without the need for a single central depository.
Market fragmentation is also evident at the issuer and investor level. Issuers face different rules when issuing securities, and investors who want to invest in multiple countries often have to open accounts in different jurisdictions. Although some European depositories already provide unified access to dozens of markets, barriers remain. Regulation has significant potential in this regard – it can help remove barriers for issuers and investors, promote competition between infrastructures, and contribute to the creation of an integrated capital market.
Europe is in a strong position in terms of global competitiveness. The EU capital market is based on a stable legal environment, a high level of investor protection and an efficient infrastructure. Compared to the US and Asia, Europe has made significant progress in standardisation and joint projects. However, there is still room for further improvement, in particular in terms of strengthening competition, interoperability and the free choice of depository by clients. These factors are key to the European market’s ability to attract investors and keep growing companies in Europe.
The success of the Capital Markets Union is closely linked to the ability to provide sufficient liquidity and secure financing for the economy. In this context, the importance of the Savings and Investment Union, which aims to channel household savings and private capital into capital markets, is increasingly being emphasised. Experts say that action is needed quickly, as deep and liquid capital markets are essential for Europe’s long-term economic growth and competitiveness.
Digitalization is a significant factor in future developments. Depositories must focus on digitalizing processes, consolidating platforms and better integrating data. Digital market infrastructure can bring significant time and cost savings, reduce the complexity of cross-border operations and increase the efficiency of the entire system. The use of artificial intelligence has similar potential, allowing for a higher level of automation and more accurate data processing. At the same time, it is important to ensure that the existing fragmentation of traditional markets is not transferred to the digital environment.
The future of the capital market is moving towards digital and tokenized securities, the wider use of which is expected around 2030. Investor interest in tokenized assets is growing, as confirmed by the steps taken by major global financial institutions. Investor behaviour is also changing, especially among the younger generation, who are increasingly using digital platforms and crypto exchanges. The future is expected to see a transition to continuous settlement of trades, the use of cloud technologies and other technological innovations. Traditional depositories will have to adapt and find new roles in this environment.
However, technological progress also brings new risks. Cyber threats are growing, requirements for physical protection of infrastructures are increasing, and reputational and regulatory risks are increasing. Deepfake technologies and the complexity associated with crypto-assets also bring new challenges. Managing these risks requires continuous innovation, a high level of security and close cooperation between infrastructures and regulators.
The European Central Bank is also responding to technological developments, focusing on supporting capital market integration, innovation, monetary sovereignty and the security of infrastructures. The ECB points to the persistent fragmentation in the area of securities issuance and asset management, which is being addressed by AMI-SeCo (Advisory Group on Securities and Collateral Market Infrastructures) and ECMS (Eurosystem Collateral Management System). In the area of distributed ledger technology, the ECB has launched the PONTES and APPIA projects to support the use of DLT in European market infrastructures. Their aim is to create modern technological solutions that will contribute to the efficient, safe and competitive functioning of the European capital market.
The information was provided at the ECSDA conference, which took place on 18 November 2025 in Brussels.
Author: Dagmar Kopuncová
