The Association for Financial Markets in Europe (AFME) has created an industry taskforce to assess a move to T+1 settlement in Europe.
The association wants to evaluate whether Europe should follow the US in implementing T+1 settlement and what a potential move looks like.
The AFME taskforce will identify the potential impact on the current post-trade environment in Europe and agree on actions required to deliver those changes.
It has issued a call for interest to the market for participation in the taskforce.
Pete Tomlinson, director of post trade at AFME, said: “AFME is convening this industry task force to ensure all aspects of T+1 adoption in Europe are considered including direct economic costs and savings to the industry as well as less tangible factors such as global alignment and market attractiveness.
“A rushed approach is likely to result in increased risks, costs and inefficiencies, particularly given the unique nature of European markets which have multiple different market infrastructures and legal frameworks.”
Coordinated effort necessary to achieve T+1 settlement in Europe
Last year, US regulators announced plans to transition to T+1 settlement from T+2 by May 2024 which is currently in place across the majority of jurisdictions including Europe.
The US is set to complete the move to T+1 settlement by May 2024 with Europe yet to announce similar proposals.
The move to T+1 is designed to drive more efficient use of capital across markets by reducing credit, market and liquidity risks.
However, challenges remain given the fragmented nature of the European market and the disproportionally high settlement fails in ETFs since the introduction of the Central Securities Depositary Regime (CSDR) in February 2022.
Tanguy van de Werve, secretary general of the European Fund and Asset Management Association (EFAMA), said: “Given the high degree of exposure to one another’s markets, the shortened settlement cycle will invariably require changes to existing processes for European firms and US investors exposed to European securities.
“It is important that we leverage on these shorter-term priorities to build an industry view on the need for, and potential roadmap to, a shortened settlement cycle in Europe.”
