Brussels (Brussels Morning Newspaper) – EU institutions coordinating to transition the EU to a T+1 settlement cycle, enhancing market efficiency and alignment with global standards.
The European Securities and Markets Authority (ESMA), the European Commission, and the European Central Bank (ECB) have revealed the next steps to sustain the EU’s preparations towards a transition to T+1. The three regulatory entities have agreed to launch a governance structure, incorporating the EU financial industry, to manage and support the technical preparations for the forthcoming move to a shorter settlement cycle.
What steps are regulators taking for the T+1 transition?
In a joint statement, the authorities state that shortening the settlement process in the EU will change how markets function, but it also gets “important benefits” for the EU Savings and Investment Union (SIU). The trend of shrinking settlement cycles welcomed a “significant boost” in May, the institutions state, when the US, Canada, Mexico, Jamaica, and Argentina finished their transition to T+1. Following that, the UK dedicated to the enactment of T+1 by 2027.
Why is the move to T+1 considered urgent?
“It is urgent to operate if the EU wants to avoid prolonging and intensifying the negative impacts of the misalignment with significant jurisdictions internationally,” the statement continues. “Given the high level of interconnectedness between the EU capital markets and those in other jurisdictions in Europe, a blended approach across Europe is desirable, with steps to reach an agreement on the timing of any move to T+1.”
Although deciding securities transactions on T+1 in EU Central Securities Depositories (CSDs) is already technically and lawfully possible, according to the authorities, amending the CSDR to mandate a coordinated shortening of the settlement cycle in the EU would ensure a blended and smooth transition to T+1 and provide legal certainty. ESMA will produce its final report on shortening the cycle to the European Council and the European Parliament in the forthcoming weeks.
