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The new system’s objective is not only to secure a more robust legal framework for financial markets and all its players, but also to provide benefits to investors and the wider economy. Moreover, the benefits of a single financial market are even more obvious when looking at the alternative: 27 separated and isolated financial systems functioning with their own rules. ESMA, as one of the three ESAs, was given the mission of improving the protection of investors and promoting stable and well-functioning financial markets in the EU.
ESMA has two key objectives as an organisation. The first being the building of a single rulebook for the regulation of the EU’s financial markets, and the second is achieving supervisory convergence and the consistent application and enforcement of the single rule book. The single rule book is important in ensuring that investors are receiving the same level of protection across the EU, while it also benefits the financial industry as it creates a level playing field and reduces the costs of providing services at a European level. In addition to these two objectives, ESMA also contributes to the regulation of financial services firms with a pan-European reach, either through direct supervision or through the active coordination of national supervisory activity.
On the supervision side, 2012 will mark the first year in which ESMA will fully exercise its duties on CRAs and [it] needs to prepare itself to take on supervisory responsibilities for Trade Repositories. ESMA will also be preparing for the work on supervisory colleges which will be established in 2013 for the regulation of cross-border central counter parties under the OTC derivatives legislation. The reach and impact of these institutions operating in one country could dramatically affect investors and intermediaries of other countries. ESMA will play, in this framework, a coordination and a mediation role if needed.
Much of ESMA’s work is conducted in the context of international agreements on the reform of financial markets. These are the G20 Commitments and they have been essential in achieving, as much as possible, comparable regulatory reforms across the various financial markets. This worldwide coordination is obviously very important considering the interconnectedness of financial markets. Concrete examples of current ESMA work which is driven by these G20 commitments are the regulation and supervision of CRAs, private equity, hedge funds, and the far-reaching reforms of the OTC derivatives market.