At the first level, the EC submits a legislative proposal, based on its right to launch such an initiative. The proposal explains the basic political aspects the EC would like to see regulated, as well as the implementing bodies it would like to involve for level 2. Prior to the submission, a consultation round is held to enable stakeholders to learn about the EC's plans at an early stage. This allows them to comment on the proposal and contribute to vision developed by the EC.
The EC's proposal is then submitted to the European Parliament (EP) and subsequently to the Council of Ministers (CoM) for the initial reading. The EP can agree to the proposal with or without amending it (in the form of textual additions, modifications or deletions) and pass it to the CoM. Subsequently, the CoM can accept or reject the proposal as received from the EP. If the CoM rejects the proposal, the CoM adopts a consensus position which is followed by a second reading and a request to the EP to propose a new position. The EP can approve the consensus position of the CoM, reject it as a whole, or make amendments to it. Approval by the EP constitutes a formal final decision. Concurrently, rejection by the EP brings the legislative procedure to an end. However, in most situations the EP amends the consensus position. Then the CoM needs to accept the amendments, or reject some or all of them. If the CoM rejects, a conciliation committee is established (which conducts a third reading).
The proposal by the EC can take the form of a directive or a regulation. A directive requires Member States to achieve a particular result without dictating the means of achieving that result. Therefore, to be effective a directive needs to be implemented in national legislation. The directive is chosen over a regulation if specific national financial markets require to have legislation tailored to each country individually. An example of this is the MiFID (Markets in Financial Instruments Directive). A directive can be distinguished from regulations which are self-executing and do not require any implementing measures.
There is no question of this intermediate step if the opted form is a regulation. A regulation comes into force immediately, rendering translation into national legislation unnecessary. The form of a regulation is chosen if the markets concerned are organised internationally to such an extent that a uniform pan-country framework is considered desirable. An example of this is the MiFIR (Markets in Financial Instruments Regulation).