ABBL answer to ESMA – Call for evidence on shortening of the settlement cycle

In response to ESMA’s call for evidence on the potential shortening of the securities settlement cycle in European markets, the ABBL, together with its members, has submitted a comprehensive response.
As a reminder, the initiative by ESMA is driven by the objective of evaluating the feasibility of reducing the settlement cycle from the current T+2 to T+1, and potentially even T+0. The consultation aims to gather insights on the anticipated costs and benefits associated with a shorter settlement period. Additionally, it seeks to determine whether regulatory measures are necessary, especially in anticipation of the North American markets‘ planned shift to T+1 settlement in May 2024.
ESMA’s call for evidence is inclusive, soliciting input from various stakeholders in the financial markets, such as market infrastructure firms, investment firms, fund managers, issuers, and both retail and institutional investors. The regulatory body emphasizes its interest in receiving quantitative evidence from market participants. The consultation encompasses a broad range of considerations, including the scope of financial instruments subject to regulation, as well as the potential impact on trading practices and retail investors.
In its response to ESMA’s call for evidence, the ABBL, in collaboration with its members, underscores the mounting pressure on European capital markets to transition to a T+1 settlement cycle, aligning with practices observed in other mature capital markets. The ABBL views this transition as crucial for Europe to sustain its competitive edge and attractiveness within the global financial landscape. However, the ABBL identifies a key challenge lying not in the settlement process itself but in the imperative to streamline and automate upstream procedures. The response advocates for coordinated industry-wide cooperation, involving all stakeholders in the transaction chain, ranging from investors and intermediaries to custodians and market infrastructures.
The ABBL’s detailed answer can be accessed on the ABBL Membernet for further insights.