Reg-X Innovations’ Post

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

Inside the latest issue - https://lnkd.in/eZp4xntX The UK implementation of T+1 Carmella Haswell of Securities Finance Times speaks to market participants on the UK government’s greenlight for the implementation of T+1, the industry’s response, and how the Accelerated Settlement Task Force will steer the country to a smooth transition

See below for the latest on securities settlement. With US now moving to T+1, it will be interesting to see what ESMA recommends later this year.

As we hurtle along to T+1 in the U.S. - as well as in the EU and the UK in the not-too-distant future - we should remember the wider context in which this is happening. T+1 in the U.S. was inspired in large part by the GameStop saga of late 2020/21: extreme trading volatility led to increased margin calls that almost broke a major retail broker and led to trading halts in GameStop and other so-called "meme" stocks. A reduced settlement period over which margin would be required by the NSCC was seen as a way to reduce risk to the system. All eyes will be on the U.S. and Canada when T+1 goes live at the end of May - and we in Europe will be watching and assessing with a view to alignment where sensible. We in the industry are coordinating closely with public authorities in order to ensure this is done when appropriate. However, context is different in Europe: Europe faces challenges and dependencies that do not exist in the U.S., and securities settlement is undertaken in a significantly different way in any case. European stakeholders must also contend with a "settlement discipline" regime that has consumed resources and attention. Settlement efficiency is seen by many as a precondition for T+1 in Europe, but the reality is that T+1 almost inevitably will lead to increased fail rates, at least for some time. An important debate is under way in the EU regarding striking a balance as we work toward establishing a timetable for T+1 in Europe. ESMA's recent Consultation on the CSDR Penalty Mechanism raised many considerations that underpin the question of how to strike this balance. In this context, in the view of the Association of Global Custodians, many of the options proposed by ESMA to increase the structual complexity of the penalty mechanism are troubling. We have urged ESMA to consider changes along these lines carefully with a view to the technical and operational challenges that they would pose to intermediaries and - ultimately - to a post-trade environment that is conducive to the goals of the Capital Markets Union agenda. Many thanks to my colleagues in the AGC (listed below) who contributed to this important submission to ESMA. #esma #shorteningsettlementcycle #posttrade Emma Johnson Marcello Topa James Cunningham Christine Strandberg Silvia Sancin Roberto De Paolis Damien Veillard

Move to T+1 is such an interesting and relevant topic for the industry. After adoption in the US, evaluating benefits and potential future complexities across regions should clearly take place before widening implementation and/or introducing higher penalty mechanisms. This is an area of much needed effective information sharing and cooperation across the industry. Great to see how the industry is indeed stepping up…. #posttrade #industrycollaboration

Hello Experts, Which choices are the best for putting out-of-box FCCS cash flow into practice after a two-year historical dataset? ( in DM, initially, Movement dimension mappings are not mapped for historical loads.)

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

It will be interesting to watch if the “velocity of money” and the “agility of data” flowing through the financial system match the speed of T+1 settlement!