EU agrees to follow US, UK in settling securities trades faster

EU regulators confirmed in a Tuesday statement that they want to speed up the settlement of securities transactions – following a shift already underway in the US and UK.  

The plan to move from T+2 settlement – where deals are finalised two working days after a trade takes place – to next-day, or T+1, has already been hailed by the financial sector, with hopes that it could also form part of the bloc’s post-Brexit cooperation with the UK.  

“The impacts of T+1 in terms of risk reduction, margin savings and the reduction of costs linked to the misalignment with other major jurisdictions globally bring along important benefits” for EU capital markets, said a joint statement by the financial services department of the European Commission, the European Central Bank and EU securities market authority ESMA.

“It is urgent to act if the EU wants to avoid prolonging and amplifying the negative impacts of the misalignment with major jurisdictions internationally,” the statement said, adding that the three institutions “consider it necessary to accelerate every aspect of the technical work" needed for the move.

The US, guided by the Securities and Exchange Commission, moved to swifter settlement in May of this year. The intention was to modernise financial markets and cut risk – but the shift left a mismatch for those who trade on both sides of the Atlantic. 

The EU financial sector has already applauded Tuesday’s statement.  

The European Fund and Asset Management Association “wholeheartedly agrees with the underlying rationale for this move,” the lobby group said in a statement, adding that ongoing misalignment would damage the competitiveness of EU financial products. 

It follows a statement made on Monday by the Association for