The European Securities and Markets Authority (ESMA) published its final report recommending significant amendments to the Regulatory Technical Standards (RTS) on Settlement Discipline. These changes aim to enhance settlement efficiency across the EU, facilitate the transition to a shorter settlement cycle (T+1) by 11 October 2027 and reduce the administrative burden on central securities depositories (CSDs) and market participants.
The draft amendments have been submitted to the European Commission, which has three months to decide on their adoption. The proposed changes are designed to improve operational readiness of the EU financial industry and include:
- same-day (trade date) timing for trade allocations and settlement instructions
- machine-readable formats for allocations and confirmations
- mandatory implementation of key functionalities such as hold and release, auto-partial settlement, and auto-collateralization
- updated provisions for the monitoring and reporting of settlement fails
- phased-in implementation schedule intended to ensure a smooth transition to the new regime beginning in December 2026 and concluding by 11 October 2027
“ESMA strongly encourages market infrastructures, financial intermediaries and their clients to treat these regulatory changes as a central element of their T+1 transition strategy,” ESMA wrote in a statement.