The European Securities and Markets Authority (ESMA) recently sought input on the possibility of shortening settlement cycles to T+1 in the EU. The financial market regulator published a report which highlights mixed feedback from market participants.

A notable finding is the recognition that shortening settlement cycles could have broader operational impacts beyond just post-trade processes. Securities borrowing and lending, repo, FX trading and cross-border activities seem to be some of the most challenging aspects of a transition to T+1, according to the report. Respondents also identified a wide range of both potential costs and benefits of a shortened cycle, with some responses supporting a thorough impact assessment before deciding. 

During the consultation, suggestions were put forward regarding how and when to implement these changes, emphasising the importance of clear regulatory guidance and collaboration between authorities and industry stakeholders. Furthermore, concerns were raised by respondents regarding the potential misalignment between settlement cycles in the EU and North America, highlighting the need for careful consideration to avoid complications.

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In addition to insights from the consultation, ESMA aims to take learnings from the transition to T+1 in North America. The authority wants to deliver a comprehensive assessment to the European Parliament and Council by 17 January.

What will T+1 mean for Europe, the UK and the Nordics? How will America’s T+1 influence European firms? Join our sessions on T+1 at PostTrade360° Nordic 2024 on 4-5 September in Stockholm and find outGet your free ticket here.