European Securities and Markets Authority (ESMA)’s Post

Key Takeaways: Faster Settlement Times: Reduced settlement periods can lead to increased liquidity and lower counterparty risk.  Market Efficiency: Streamlined processes will benefit all market participants.  Regulatory Insights: Gain valuable insights from regulatory experts.  #SettlementCycle #MarketEfficiency #FinancialRegulation #RiskManagement #SecuritiesMarket #RegulatoryUpdates #FinancialServices #MarketLiquidit #RegX #Regtech

It was a pleasure for me to speak at the public hearing of the European Securities Markets Authority on T+1 in Paris. Below are some thoughts I shared.   The settlement process is fully automated and can be performed by CSDs intra-day or per another requested settlement cycle. Significant amounts settle on T+1 already today. So what’s the challenge? It is because there are two flows: 1️⃣ is fully automated, the flow of instructions from TVs to CSDs.  2️⃣ parallel process is to be concluded by participants and their clients before the settlement instruction reaches the CSD. It requires that the necessary funds (securities and cash) are in the right account, at the right time and available for settlement.  So, if the infrastructure changed the cycle tomorrow, the levels of settlement efficiency would not be as they are today. 😱 Settlement efficiency is the indication of the level of reduction of settlement risk (of non-delivery of securities on time). Other transactions may be dependent on the one to be settled and may then also fail, creating a chain reaction leading to systemic risk. For that second process, despite the high level of legal and tax fragmentation in #EU leading to a higher challenge for the regional participants in comparison with others, the range of solutions available in Europe is already very significant and goes beyond what is available to CSD participants in other regions, including those that moved to T+1 already. There is room for a higher level of use of some of these solutions, such as partial settlement. 👉 Still, as we anticipate the struggle with the parallel flow of processes, CSDs may be able to consider a delay of the beginning of the night cycle, subject to discussions within their User Committees and Boards. But should the changes at CSD and T2S levels be deep and numerous – this would be a sign that we are looking at tackling the challenge from the wrong side and more measures need to be taken earlier in the chain.   Finally, we should be realistic with our plans to be able to move at the same time with the UK and CH, since the alignment is crucial (due to the deep TVs-CCPs-CSDs connections). But the UK date is broadly set for 2027. So, the longer Europe reflects on whether to move, the less time is available to the entire European industry to work on the levels of settlement efficiency by the time of the move, which we expect to be aligned with other jurisdictions in the region. Otherwise, more pre-funding will be required. Special thanks to my fellow panellists and ESMA! Andrea Gentilini, GFR Rosa Armesto Plaja Rafael Plata Vincent Ingham Aleksandra Mączyńska karole-anne sauvet Antonio Ocana Alvarez Carsten Ostermann Alina Dragomir Verena Ross

The convergence of a move to T+1 in Europe, together with the rapidly increasing interest in technology is something firms should be considering in their 2025/6 strategies. Based on regulatory community narrative and explosion of technology oriented meetings, this might be already happening.

📢 This Wednesday, 22 May, we are hosting an informative Settlement Seminar in Milan to explore the potential advantages and challenges of transitioning to T+1 settlement cycles in Europe. Representatives from regulatory authorities, industry associations, and financial institutions will examine how ongoing operational, regulatory, and technological changes will impact participants and offer practical guidance for navigating these changes in the European market. Looking forward to a day of insightful discussions and expert perspectives! #SettlementSeminar #FinancialMarkets #EuronextMilan #T1Transition

🌐 FESE believes reducing the settlement cycle from T+2 to T+1 should be closely coordinated among regulators, market participants, and Financial Market Infrastructures (FMIs). From a technical perspective, Trading Venues can potentially support any “T+n” settlement cycles (with an appropriate adaptation timeline). However, operational readiness can be challenging for some market participants. FESE Members are ready to support and follow their customers if a shift to T+1 materialises. 📃 🤝 🔹 Find more on our website: https://lnkd.in/ed9i4aw3

In response to a Call for Evidence on shortening settlement cycles in the EU, published by European Securities and Markets Authority (ESMA), AFME has today published a comment. This Call for Evidence is an important step in moving forward the debate on T+1 settlement. Moving to T+1 should not only be a question of “when”, but also “why” and “how”. It is important to ensure that any decision to shorten the settlement cycle is underpinned by a robust qualitative and quantitative analysis of the potential benefits, risks and costs, and also takes account of the unique complexities of EU capital markets. Any potential move to T+1 will require collaboration from a broad range of industry stakeholders, with the ultimate objective of making EU securities markets safer and more efficient. We welcome the opportunity to contribute to this initiative. Read the press release here: https://bit.ly/3QesczL

ICYMI: Part one of our In-depth series looked at the cascading risks in Financial Markets on the back of the switch to T+1 in US markets. Yesterday, Financial News reported settlement failures have increased by 10%. Next week: “Immobilisation, Dematerialisation, Tokenisation”. We will be publishing part two of our In-depth series. Subscribe to the LinkedIn newsletter: https://bit.ly/3X7BH7m #Indepth #T1 #posttrade #settlement #digitalassets

On October 10, the #SEC adopted final rules amending Schedules 13D and 13G of the Securities Exchange Act of 1934 to modernize its reporting rules and ultimately speed up the rate at which beneficial ownership information is made available to the public. #exchangeact

Hello everyone, It has been some time since my last post on LinkedIn, and I am pleased to have the opportunity to share pertinent information with you. This update holds particular relevance for individuals within various professional capacities, including business owners, accountants, and financial analysts, among others. There has been an amendment to IFRS 9, Financial Instruments issued by the International Accounting Standard Board (IASB). With this new amendment, companies may be permitted to derecognize financial liabilities settled by an electronic payment system earlier than their settlement date, subject to certain criteria being met. Let me explain this with a story: Once upon a time, in the bustling streets of Kuala Lumpur, there lived a man named Jaiyeola, a Malaysian entrepreneur with a passion for culinary innovation. His claim to fame? Cocoyam chips, a unique snack beloved by locals and tourists alike. Jaiyeola's journey to success was not without its challenges, particularly in sourcing the finest ingredients for his delectable chips. Enter Ayomiposi, a renowned farmer from Nigeria known for cultivating the plumpest cocoyams in the region. In their business arrangement, Jaiyeola would purchase large quantities of cocoyams from Ayomiposi on credit, a testament to the trust they shared. With each transaction, Jaiyeola's accountant meticulously recorded the entries, ensuring financial transparency and accountability. Hence, when he he bought cocoyam valued N1m from Miss Ayomiposi. His accountant passed the entries below: Dr Inventory - N1m Cr Ayomiposi Payable - N1m Being the purchase of Cocoyam on credit. It has been a month now and the payment is due on the basis of the agreement with his foreign vendor, Ayomiposi, hence Jaiyeola had to transfer N1m from his bank account to Ayomiposi’s. Typically, the transaction would about 2 -3 days before the payment can be completed i.e reflected in the vendor’s bank account (Ayomiposi’s). On December 31, 2023 (the last day of the financial year), the accountant reached out to Miss Ayomiposi however she claimed not to have received the funds yet so the accountant had to pass the entries below as he could not recognize the payment as being paid because the vendor has not confirmed receipt. Cr Bank – N1m Dr Cash in Transit – N1m Being Cash in Transit for payment to Miss Ayomiposi for purchase of Cocoyam The amendments have solved this dilemma, as from 1 January 2026 (or earlier), you can derecognize the Trade payables (recognize that payment has been made) based on certain derecognition exception criteria The Criteria are thus: a)     There is no practical ability to withdraw, stop or cancel the payment instruction. b)     There is no practical ability to access the cash to be used for settlement as a result of payment instruction. c)     The settlement risk associated with the electronic payment is insignificant. Continued in the comment box!

On October 10, the #SEC adopted final rules amending Schedules 13D and 13G of the Securities Exchange Act of 1934 to modernize its reporting rules and ultimately speed up the rate at which beneficial ownership information is made available to the public. #exchangeact