The European Securities and Markets Authority (ESMA) has published its final report outlining proposed amendments to the Regulatory Technical Standards (RTS) on settlement discipline under the Central Securities Depositories Regulation (CSDR). The changes aim to address practical challenges observed since the regime first came into force and to support Europe’s upcoming shift to a T+1 settlement cycle.
Following a consultation earlier this year, ESMA’s report reflects extensive feedback from market participants and coordination with the Market Infrastructure and Payments Committee (MIPC) of the European System of Central Banks. The adjustments seek to improve the timeliness and standardisation of settlement instructions, reduce settlement fails, and enhance transparency around fail reporting.
Among the key changes, investment firms will be required to ensure allocation and confirmation details are submitted by 23:00 CET on the trade date, and to use electronic, standardised formats that can be processed automatically. Communication between firms and clients will need to rely on international open standards, while clients must provide all relevant reference data in machine-readable form to facilitate prompt settlement.
Stronger requirements for CSDs
Central securities depositories (CSDs) will face expanded operational obligations. ESMA proposes to make auto-partial settlement and hold & release functionalities mandatory, with partial settlement as the default unless participants opt out. CSDs must also provide automated intra-day credit access, such as through auto-collateralisation, and offer at least three daily batch settlement cycles or real-time gross settlement options.
The reporting framework will also tighten. CSDs will need to disclose settlement fail data broken down by instrument type and trading venue, including reasons for fails and proposed corrective measures. ESMA will also require new metrics such as the average duration of settlement fails, while eliminating redundant annual reports in favour of existing monthly submissions.
Gradual implementation
Acknowledging the technical and operational complexity of these changes, ESMA recommends a phased implementation aligned with the transition to T+1. Pre-settlement process requirements would take effect on 7 December 2026, followed by enhanced reporting obligations from 1 July 2027. More extensive IT-related updates for CSDs are slated for 11 October 2027, coinciding with the expected T+1 go-live date.
The final report was submitted to the European Commission in October 2025, which now has three months to decide on endorsing the revised RTS.
