AFME responds to ESMA consultation on EU settlement cycles
15 December 2023 Europe
Image: j-mel
The Association for Financial Markets in Europe (AFME) has issued a response to the European Securities and Markets Authority’s (ESMA) consultation on shortening settlement cycles in the EU.
AFME states that it fully supports the notion that any decision to shorten settlement cycles in the EU should be based on proper cost-benefit analysis. AFME believes that the potential broader market impacts on trading and competitiveness in EU markets must be considered.
AFME continues to argue that any move to T+1 must be effected in a way which mitigates possible risk and does not damage existing levels of efficiency. It further argues that a coordinated approach across Europe, including EEA countries, Switzerland and the UK is required.
The association says that the North American adoption of T+1 in May 2024 is a chance to assess and incorporate ‘lessons learned’ before making a decision in Europe. However, it states that adopting T+1 in Europe may pose differing challenges.
Pete Tomlinson, director of post trade at AFME, says: “Moving to a T+1 settlement cycle will be a complex and demanding undertaking for the entire industry, so it is important that feedback is carefully considered before next steps are decided.
“If a decision to move to T+1 is made, it will be necessary to define an appropriate timetable that generates industry momentum and provides clarity to market participants.”
AFME states that it fully supports the notion that any decision to shorten settlement cycles in the EU should be based on proper cost-benefit analysis. AFME believes that the potential broader market impacts on trading and competitiveness in EU markets must be considered.
AFME continues to argue that any move to T+1 must be effected in a way which mitigates possible risk and does not damage existing levels of efficiency. It further argues that a coordinated approach across Europe, including EEA countries, Switzerland and the UK is required.
The association says that the North American adoption of T+1 in May 2024 is a chance to assess and incorporate ‘lessons learned’ before making a decision in Europe. However, it states that adopting T+1 in Europe may pose differing challenges.
Pete Tomlinson, director of post trade at AFME, says: “Moving to a T+1 settlement cycle will be a complex and demanding undertaking for the entire industry, so it is important that feedback is carefully considered before next steps are decided.
“If a decision to move to T+1 is made, it will be necessary to define an appropriate timetable that generates industry momentum and provides clarity to market participants.”
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