EU announces next steps on move to T+1: ‘It is urgent to act’
15 October 2024 EU
Image: Johannes/stock.adobe.com
The European Securities and Markets Authority (ESMA), the European Commission, and the European Central Bank (ECB) have announced the next steps to support the EU’s preparations towards a transition to T+1.
The three regulatory bodies have agreed to establish a governance structure, incorporating the EU financial industry, to oversee and support the technical preparations for the future move to a shorter settlement cycle.
In a joint statement, the authorities say that shortening the settlement cycle in the EU will change how markets function, but it also brings “important benefits” for the EU Savings and Investment Union (SIU).
The trend of shortening settlement cycles received a “significant boost” in May, the institutions say, when the US, Canada, Mexico, Jamaica, and Argentina completed their transition to T+1.
Following that, the UK committed to the implementation of T+1 by 2027.
“It is urgent to act if the EU wants to avoid prolonging and amplifying the negative impacts of the misalignment with major jurisdictions internationally,” the statement continues. “Given the high level of interconnectedness between the EU capital markets and those in other jurisdictions in Europe, a coordinated approach across Europe is desirable, with efforts to reach a consensus on the timing of any move to T+1.”
Although settling securities transactions on T+1 in EU Central Securities Depositories (CSDs) is already technically and legally possible, according to the authorities, amending the CSDR to mandate a harmonised shortening of the settlement cycle in the EU would ensure a coordinated and smooth transition to T+1 and provide legal certainty.
ESMA will deliver its final report on shortening the cycle to the European Council and the European Parliament in the coming weeks.
The three regulatory bodies have agreed to establish a governance structure, incorporating the EU financial industry, to oversee and support the technical preparations for the future move to a shorter settlement cycle.
In a joint statement, the authorities say that shortening the settlement cycle in the EU will change how markets function, but it also brings “important benefits” for the EU Savings and Investment Union (SIU).
The trend of shortening settlement cycles received a “significant boost” in May, the institutions say, when the US, Canada, Mexico, Jamaica, and Argentina completed their transition to T+1.
Following that, the UK committed to the implementation of T+1 by 2027.
“It is urgent to act if the EU wants to avoid prolonging and amplifying the negative impacts of the misalignment with major jurisdictions internationally,” the statement continues. “Given the high level of interconnectedness between the EU capital markets and those in other jurisdictions in Europe, a coordinated approach across Europe is desirable, with efforts to reach a consensus on the timing of any move to T+1.”
Although settling securities transactions on T+1 in EU Central Securities Depositories (CSDs) is already technically and legally possible, according to the authorities, amending the CSDR to mandate a harmonised shortening of the settlement cycle in the EU would ensure a coordinated and smooth transition to T+1 and provide legal certainty.
ESMA will deliver its final report on shortening the cycle to the European Council and the European Parliament in the coming weeks.
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