Authorities welcome new governance structure for T+1 transition in EU
23 January 2025 Europe
Image: Pixel_Matrix/stock.adobe.com
The European Securities and Markets Authorities (ESMA), the European Commission, and the European Central Bank (ECB) have launched a new governance structure to support the transition to T+1 in the EU.
Following a governance launch meeting on 22 January, the new structure has been designed to oversee and manage the operational, regulatory, and technological aspects of this transition.
ESMA has recommended 11 October 2027 as the optimal date for the transition, which will be implemented in phases, with key milestones including technology upgrades, stakeholder engagement, and regulatory alignment.
Given the high level of interconnectedness within the EU capital market, a coordinated approach across the EU, involving authorities, market participants, financial market infrastructures and investors, is desirable, says ESMA.
The new structure involves an Industry Committee chaired by Giovanni Sabatini, and will compose of senior leaders and representatives from market players.
Sabatini has a long-standing experience working in securities markets, both in the private and public sectors. He has previously served as a member of the European Economic and Social Committee.
In addition to the Industry Committee, several technical workstreams will take place, focusing on technological operational adaptations needed in the areas concerned by the transition to T+1.
These areas include trading, matching, clearing, settlement, securities financing, and asset management.
Further, two more general workstreams will review the scope and the legal and regulatory aspects of these adaptations.
Thirdly, a Coordination Committee will ensure coordination between the authorities and the industry, advising on challenges that may arise during the transition.
It will be chaired by ESMA, with representation from the European Commission, the ECB and Sabatini.
Shortening the trade settlement cycle from the current T+2 framework to one business day should enable faster execution, clearing, and settlement of securities transactions, as well as international alignment, benefiting the entire EU financial ecosystem, adds ESMA.
The European commission is currently considering the merits of a legislative change mandating a potential transition to a shorter settlement cycle.
Following a governance launch meeting on 22 January, the new structure has been designed to oversee and manage the operational, regulatory, and technological aspects of this transition.
ESMA has recommended 11 October 2027 as the optimal date for the transition, which will be implemented in phases, with key milestones including technology upgrades, stakeholder engagement, and regulatory alignment.
Given the high level of interconnectedness within the EU capital market, a coordinated approach across the EU, involving authorities, market participants, financial market infrastructures and investors, is desirable, says ESMA.
The new structure involves an Industry Committee chaired by Giovanni Sabatini, and will compose of senior leaders and representatives from market players.
Sabatini has a long-standing experience working in securities markets, both in the private and public sectors. He has previously served as a member of the European Economic and Social Committee.
In addition to the Industry Committee, several technical workstreams will take place, focusing on technological operational adaptations needed in the areas concerned by the transition to T+1.
These areas include trading, matching, clearing, settlement, securities financing, and asset management.
Further, two more general workstreams will review the scope and the legal and regulatory aspects of these adaptations.
Thirdly, a Coordination Committee will ensure coordination between the authorities and the industry, advising on challenges that may arise during the transition.
It will be chaired by ESMA, with representation from the European Commission, the ECB and Sabatini.
Shortening the trade settlement cycle from the current T+2 framework to one business day should enable faster execution, clearing, and settlement of securities transactions, as well as international alignment, benefiting the entire EU financial ecosystem, adds ESMA.
The European commission is currently considering the merits of a legislative change mandating a potential transition to a shorter settlement cycle.
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