24 July 2013
Reporter: Mark Dugdale
Securities Lending default image
European CSDs to settle down early
Euroclear’s central securities depositories (CSDs) in Belgium, France and the Netherlands will settle all transactions on a T+2 basis from October 2014, ahead of the implementation of the CSD Regulation in Europe.

The aim of the EU’s CSD Regulation is to bring more safety and efficiency to securities settlement in Europe.

The European Commission adopted a proposed regulation in March 2012. MEPs and the EU Council are currently scrutinising.

The regulation has a planned implementation date of 2015.

If it is implemented in its current form, the CSD Regulation would harmonise the settlement period in Europe for securities traded on stock exchanges and other regulated markets at T+2, taking it from the current two to three days.

Euroclear Belgium, France and Nederland plan to implement T+2 settlement in October 2014 for all securities transactions conducted on all trading venues (stock exchanges, multi-lateral trading facilities and organised trading facilities).

OTC transactions will be exempt from the T+2 regime.

Valérie Urbain, CEO of Euroclear Belgium, France and Nederland, said: “The concept of a shorter settlement cycle across Europe has its roots in the work of the Giovannini Group in 2001–2003. We concur with the Association for Financial Markets in Europe’s recent findings that a move towards a shorter settlement cycle will increase operational efficiency, as well as drive down counterparty risks.”

“After extensive consultation with clients and stakeholders in our markets, we took the decision to commit to T+2 settlement now, and to make the transition earlier than required.”

Urbain added: “Technically and functionally, Euroclear CSDs are ready today to settle on a T+2 basis. The shorter settlement cycle will require some changes in market practice disciplines such as pre-settlement matching, confirmation and affirmation of client transactions as early as possible, ideally on trade date.”

Euroclear Finland, Sweden and UK & Ireland are in various stages of discussions about a move towards a T+2 cycle, while international central securities depository Euroclear Bank already settles trades as early as T+0 provided that both counterparties to the trade agree to the same settlement period.

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