Europe gets ready for T + 2

Abstract

In April 2014, the European Parliament approved the proposal for a Central Securities Depository Regulation (CSD-R), aimed at improving settlement efficiency across Europe. The proposal will become law once it has been written into the Official Journal in September 2014 and, in the meantime, the European Securities Market Association (ESMA) has started work on level II technical detail. The effect of the new rules on trade settlement will be significant, as significant as the Markets in Financial Instruments Directive (MiFID) II’s impact on trading and the European Market Infrastructure Regulation’s (EMIR’s) on clearing. The harmonisation of settlement cycles across European Union member states to T+2 is a key measure of the CSD-R. The industry, policy makers and politicians have largely supported this rule change, to the extent that a growing number of European markets have agreed to move to T+2 by 6th October, 2014, ahead of the proposed regulatory deadline which is currently mooted as 1st January, 2015, although likely to be delayed due to regulatory processes. Investment managers, sell-side institutions and custodians now need to ensure they are ready to adhere to the harmonised settlement regimes.