ESMA reports mixed feedback on shortening settlement cycle
22 March 2024 Europe
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The European Securities and Markets Authority (ESMA) has published market feedback on its Call for Evidence on shortening the settlement cycle in the EU to T+1.
The report indicates a mixed response, with respondents identifying a wide range of both potential costs and benefits of a shortened cycle, while other respondents supported a thorough impact assessment before deciding.
The feedback provides suggestions around how and when a shorter settlement cycle could be achieved.
Participants highlighted the need for a clear signal from the regulatory front at the start of the work and clear coordination between regulators and the industry.
The report also indicates that stakeholders made clear the need for a proactive approach to adapt their own processes to the transition to T+1 in other jurisdictions.
Some responses warned about potential infringements due to the misalignment of the EU and North America settlement cycles, which ESMA says it is currently assessing.
The association says several questions remain to be further assessed before implementing T+1. This includes greater investigation of the impacts on securities lending and borrowing, as well as benefits resulting from margin reductions for cleared transactions.
ESMA intends to deliver its final assessment to the European Parliament and to the Council before 17 January 2025.
The report indicates a mixed response, with respondents identifying a wide range of both potential costs and benefits of a shortened cycle, while other respondents supported a thorough impact assessment before deciding.
The feedback provides suggestions around how and when a shorter settlement cycle could be achieved.
Participants highlighted the need for a clear signal from the regulatory front at the start of the work and clear coordination between regulators and the industry.
The report also indicates that stakeholders made clear the need for a proactive approach to adapt their own processes to the transition to T+1 in other jurisdictions.
Some responses warned about potential infringements due to the misalignment of the EU and North America settlement cycles, which ESMA says it is currently assessing.
The association says several questions remain to be further assessed before implementing T+1. This includes greater investigation of the impacts on securities lending and borrowing, as well as benefits resulting from margin reductions for cleared transactions.
ESMA intends to deliver its final assessment to the European Parliament and to the Council before 17 January 2025.
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