On 7 March 2012, the Commission adopted a proposal for a Regulation on improving securities settlement in the European Union and on central securities depositories (CSDs). The Regulation introduces an obligation of dematerialisation for most securities, harmonised settlement periods for most transactions in such securities, settlement discipline measures and common rules for CSDs.

The settlement period has been harmonised and set at a maximum of two days after the trading day for the securities traded on stock exchanges or other regulated markets (previously two to three days were necessary for most securities transactions in Europe).

Markets within the scope of the CSDR text migrated from T+3 to T+2 with effect from Monday, 6 October 2014.

In the light of these changes, ICMA’s European Repo Council* amended its Guide to Best Practice in the European Repo Market, these changes can be found here.


OTC transactions

The CSD Regulation states, in Article 5(2), that the migration should not apply to transactions that are privately negotiated and executed on a trading venue, or transactions that are executed bilaterally but are reported to a trading venue.

The ‘ICMA market’ refers to transactions in international securities, intended to be traded on an international cross border basis through an International central securities depository, which are often negotiated bilaterally and may be neither executed nor reported to a trading venue; it follows that these transactions will be out of scope for the CSDR.

To allow for orderly trading of all fixed income securities traded under ICMA rules, ICMA will also change the standard settlement cycle set out in the ICMA Rules and Recommendations from T+3 to T+2 unless otherwise agreed; it is expected that agreement to a different settlement cycle will be recorded in writing at the time of trade.

Security Financing Transactions

With the move to T+2 for much of the European bond markets, this will have implications for related securities financing transactions (SFTs), including repurchase agreements. Currently, the most active settlement date for the near-leg of SFTs is T+2, one day shorter than the standard settlement date of the underlying security. Post T+2, in many cases, this is likely to move to T+1. However, SFTs remain completely flexible instruments with no standardized settlement date.

The practical effects for repo transactions of the migration to T+2 settlement for underlying cash securities is illustrated here.


A report by the ICMA European Repo Council’s* Operations Group

August 2014

The EU Central Securities Depositories Regulation (CSDR), which was adopted on 15 April 2014, will impose a harmonised ‘standard’ settlement date within the European Economic Area (EEA) of two business days after the transaction date (T+2) for transferable securities, money-market instruments, units in collective investment undertakings (UCITS) and emission allowances. ICMA and AFME are recommending that their members in the OTC fixed-income cash market also switch to T+2 on 6 October 2014.

To avoid confusion and fragmentation around settlement dates in the European bond markets, the ICMA ERC’s* Operations Group has prepared a report on the impact of T+2 settlement on the European bond and repo markets.

To view the report, click here.

*On 4 December 2015, the name of the European Repo Council (ERC) was changed to the European Repo and Collateral Council (ERCC).

See also: CSDR Settlement Discipline

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