Réponse AFG au Call for Evidence de l’ESMA sur un raccourcissement du cycle de règlement livraison

In response to ESMA‘ Call for Evidence regarding the potential reduction of the securities settlement cycle in the EU from T+2 to T+1, the AFG published a response and appreciates the opportunity to contribute to the discussion. The objective of this call is to gather insights from market participants and quantitative data to evaluate the costs, benefits, and regulatory requirements associated with such a change. ESMA specifically seeks input on the scope of regulated financial instruments, the impact on trading, and implications for retail investors. ESMA aims to publish its findings in 2024, potentially sooner if regulatory action is deemed necessary.
As a reminder, following the announcements by the United States and Canada to transition to a T+1 settlement cycle effective May 2024, ESMA initiated the Call for Evidence on 5 October 2023. The goal is to collect perspectives from market actors and quantitative data to assess the desirability of shortening the securities settlement cycle to T+1 or even T+0 in the EU. AFG acknowledges the importance of considering the costs and benefits of such a change, particularly in light of ongoing industry preparations for the new settlement cycle imposed by the US and Canada.
AFG notes its ongoing efforts in preparing the French and European industry for the impending shift to a T+1 settlement cycle. The association highlights its concerns about the potential benefits of this change, specifically in terms of reducing settlement failures and risk exposure. Given the recent publication of the CSDR Refit, AFG expresses reservations about the timeliness of ESMA’s call for evidence, considering the need for comprehensive industry adaptation.
Despite ongoing work to understand the impact of the T+1 settlement cycle, AFG finds it premature to delve into the possibility of T+0.5 or T+0 settlement cycles. The challenges identified for T+1 would be exacerbated with a move to T+0, necessitating a significant transformation of current processes and posing new risks. AFG emphasizes the importance of a cautious approach in the face of potential disruptions to the market.
AFG presents several general considerations as preliminary remarks. Firstly, the association recognizes the European authorities‘ interest in aligning settlement cycles across jurisdictions to avoid misalignments. However, AFG emphasizes the need to ensure that new settlement frameworks do not detrimentally impact existing efficiency and access to EU capital markets. The complexity and fragmentation of the European market structure, with numerous CSDs, CCPs, settlement systems, currencies, and legal frameworks, present challenges that differ significantly from the more streamlined structure in the United States.