Following the SEC’s rule amendments to shorten the standard settlement cycle for most broker-dealer transactions from two business days after the trade date (“T+2”) to one business day after trade date (“T+1), which will go live on 28 May 2024 (the Memorial Day weekend), discussions have started in the UK and EU as to whether these jurisdictions should follow the US’s lead and align at some point in the future. In both cases, this would be a major industry transformation which will require significant investment to upgrade post-trade systems and processes as well as related technology and will have important implications from a trading, funding, and market liquidity perspective. ICMA is closely involved in these discussions, representing members’ views and concerns.

ICMA has created a T+1 Taskforce (comprising members of the SMPC, ERCC, and MIAG) to engage in these discussions and related consultations. In particular, ICMA is keen to stress the importance of assessing the impact of shorter settlement cycles on trading and market liquidity, as well as on repo and securities financing (noting that SFTs, by their very nature, do not have standard settlement cycles).

UK
In early 2023, HM Treasury established the UK Accelerated Settlement Taskforce (AST). The AST is mandated to assess benefits and challenges of a potential UK move to T+1, and to prepare an interim report with initial findings by the end of 2023 and a final report by the end of 2024. Membership of the AST consists of a number of trade associations including ICMA, as well as lawyers, consultants, and some industry representatives. While there are still a number of issues to be resolved in assessing the benefits and challenges of a potential UK move to T+1, which has led to a delay in the publication of the interim report, it is now hoped that this will be published in early 2024 along with an accompanying consultation.

EU
The CSDR Refit mandated ESMA to produce a report by the end of 2024 on the costs and benefits of a potential shortening of the settlement cycle in the EU. As a first step in this process, on 5 October 2023, ESMA launched a consultation (“call for evidence”) on shortening the settlement cycle with a deadline for comments by 15 December 2023. ICMA's T+1 Taskforce's response to the consultation is available here.

In anticipation of the ESMA mandate, a cross-industry taskforce was created, consisting of a number of trade associations, including ICMA. This continues to convene on a regular basis with the aim of coordinating industry feedback, as well as any quantitative analysis, to help inform ESMA’s work.


Contacts

Alexander Westphal
Senior Director, Market Practice and Regulatory Policy; secretary to the ICMA European Repo and Collateral Council (ERCC) and Committee, and ERCC Operations Group
Direct line: +44 20 7213 0333

Nina Suhaib-Wolf
Director, Market Practice and Regulatory Policy
Direct line: +44 20 7213 0318

 

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