ESMA consults on shortening settlement cycles

Due to recent developments, the question of shortening the securities settlement cycle has emerged. Through this call for evidence, the European Securities and Markets Authority (ESMA) is seeking to collect stakeholders’ views as well as quantitative evidence to form a better understanding of the issue and help ESMA to then produce an assessment of the costs and benefits linked to the potential reduction of the securities settlement cycle in the EU.

In parallel to this call for evidence, ESMA is consulting central banks as well as the T2S operator on what would be the impact of a shorter settlement cycle for the operation of T2S.

ESMA is seeking feedback on the following issues:

  • What would be the impact of the reduction of the securities settlement cycle in the operations of market players;
  • What would be the benefits and the costs that a shorter securities settlement cycle would bring;
  • If it is concluded that a mandatory shorter settlement cycle should be imposed, how and when a shorter settlement cycle could be achieved;
  • What are the impacts on the EU’s capital markets resulting from international developments related to securities settlement.

Pete Tomlison, director of Post Trade at the Association for Financial Markets in Europe (AFME), said in a statement: “This Call for Evidence is an important step in moving forward the debate on T+1 settlement. Moving to T+1 should not only be a question of “when”, but also “why” and “how”. It is important to ensure that any decision to shorten the settlement cycle is underpinned by a robust qualitative and quantitative analysis of the potential benefits, risks and costs, and also takes account of the unique complexities of EU capital markets. “Any potential move to T+1 will require collaboration from a broad range of industry stakeholders, with the ultimate objective of making EU securities markets safer and more efficient.”

The International Securities Lending Association (ISLA) noted that its response will be led by  its Accelerated Settlement (T1) Working Group.

Read the full consultation

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