The European Securities and Markets Authority (ESMA) has published feedback to its call for evidence on shortening the EU settlement cycle, reporting “quite mixed” results.
“Before going into the detailed summary of the feedback received it is worth noting that respondents have been almost unanimous regarding T+0,” the results paper says in its introduction, with participants suggesting that the costs “would largely outweigh the benefits” and advising that ESMA focuses its assessment exclusively on T+1. The association voiced its agreement with this feedback and will no longer be considering T+0 in its assessment.
Respondents advocated for clear coordination between regulators and the industry, with “a clear signal from the regulatory front” as work begins to shorten the settlement cycle. A range of costs and benefits associated with a shortened cycle were highlighted, and a thorough impact assessment recommended before action is taken.
The impact on operations beyond post-trade processes was also raised by contributors, as was the need for participants to take a proactive approach in adapting their own processes in response to other jurisdictions’ shifts to T+1. Some mentioned potential infringements that could result from EU and North American settlement cycle misalignment, an issue which ESMA stated it is currently assessing.
The association intends to deliver its final assessment to the European Parliament and to the Council before 17 January 2025, it said, taking into consideration lessons learned from the North American move to T+1 this May. “Several questions remain to be further assessed and better understood” before this report can be produced, it concluded.
ESMA affirmed that responses will continue to be assessed along with feedback from APAC region stakeholders, small and medium market participants and retail investors and their representatives.
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