EU announces next steps on move to T+1: 鈥業t is urgent to act鈥�
15 October 2024 EU
Image: Johannes/stock.adobe.com
The European 色花堂and Markets Authority (ESMA), the European Commission, and the European Central Bank (ECB) have announced the next steps to support the EU鈥檚 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 鈥渋mportant benefits鈥� for the EU Savings and Investment Union (SIU).
The trend of shortening settlement cycles received a 鈥渟ignificant boost鈥� 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.
鈥淚t is urgent to act if the EU wants to avoid prolonging and amplifying the negative impacts of the misalignment with major jurisdictions internationally,鈥� the statement continues. 鈥淕iven 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.鈥�
Although settling securities transactions on T+1 in EU Central 色花堂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 鈥渋mportant benefits鈥� for the EU Savings and Investment Union (SIU).
The trend of shortening settlement cycles received a 鈥渟ignificant boost鈥� 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.
鈥淚t is urgent to act if the EU wants to avoid prolonging and amplifying the negative impacts of the misalignment with major jurisdictions internationally,鈥� the statement continues. 鈥淕iven 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.鈥�
Although settling securities transactions on T+1 in EU Central 色花堂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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