The UK’s Accelerated Settlement Taskforce has delayed its expected report to Q1 of next year and announced new plans to establish a Technical Group to develop market standards for a transition. In a letter sent to Taskforce participants on Monday, CEO Charlie Geffen explained that he wants more time to hear industry views, particularly on the issue of timing.Â
The UK’s Accelerated Settlement Taskforce has been dogged by rumours of an internal divide, with debate over when the UK might actually transition to a T+1 settlement cycle and concerns over potential (mis)alignment with Europe. First established in 2022 and with plans for an initial report on the issue by December 2023, the latest letter from the group (seen by BEST EXECUTION) suggests that consensus has not yet been reached.
Geffen outlines the transition process as having two phases: first, establishing market standards around issues such as trade date allocations, confirmations and matching; and second, the actual transition to T+1. “The one issue on which there are differences of view is the date on which the transition to T+1 should take place,” said Geffen.
“Some wish to minimise the period of misalignment with the US which moves to T+1 in May next year, whilst others wish to align with the EU for which there is currently no time frame.”
Geffen also noted that “the costs and burden of implementing a transition lie unevenly with the benefits,” which “unsurprisingly” has resulted in different perspectives.
Although there is a risk that nothing will happen unless there is a time frame, Geffen warned that “it makes no sense to set a date in stone at this stage, not least because we need to learn any lessons from the US move”.
The Taskforce will therefore delay publishing its report until Q1 2024 to ensure that all those who wish to contribute are able to do so.
In the meantime, Geffen plans to create a Technical Group, under the aegis of the Taskforce, which will work to “establish market standards where needed and find the solutions to enable a smooth transition to take place”. The group will also seek to identify the costs and benefits of a move, the downsides of not moving, and the risks of misalignment with the US and the EU.
Key themes for the Technical Group will include the scope of any transition (including ETFs, mutual funds, less liquid securities, Euromarket Securities and non-UK government bonds); operational processes and deadlines; FX issues and impact on overseas investors; stock lending and recalls; repos; trading and liquidity issues, including funding implications; corporate actions; infrastructure resilience; alignment issues/risks with both the US and EU; and any lessons from the upcoming US move in May.
Anyone wishing to participate in the Technical Group should contact Geffen by 5 January 2024 indicating their interest in a particular area.
Linda Gibson, head of regulatory change EMEA at BNY Mellon Pershing, welcomed the news, which she said showed that the Taskforce had taken industry considerations on board in terms of moving forward with a phased approach.
“Looking ahead, we’d urge the soon-to-be-formed Technical Group and the wider financial services market to look closely at how the shortened settlement timeline lands in the U.S. and Canada in May 2024 to help finalise when and how the UK makes the move. There will no doubt be unexpected consequences, which the UK can analyse and learn from to ensure a smooth transition and ultimately protect UK capital markets from adverse impacts that could harm competitiveness,” she said.
“However, before a date can be set, the scope and impact of the transition must be defined. This has been recognised by the Taskforce, which has established scope as a key theme to be addressed by the Technical Group. Until these elements have been established there is no commercial benefit in confirming a deadline for the transition and even greater risks posed by setting a date that might need to be rolled back.”
With a second EU-UK Financial Regulatory Forum (following the inaugural event in October 2023) coming up early next year, the issue of potential alignment is likely to be firmly on the agenda.
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