Visi Money
The European Union (EU) will follow the US in cutting settlement times for stock trades, according to the EU’s financial services chief, Valdis Dombrovskis. Dombrovskis said the EU is planning to reduce the timeframe from the standard two days after the trade to one day, or possibly even to near real-time settlement. The move aims to lower risks in the financial system and improve efficiency in trading. Dombrovskis added that the shorter settlement period would reduce market participants’ reliance on post-trade credit and free up capital.
Dombrovskis said that the shortening of settlement times will align the EU with international standards, as the US and some Asian countries have already adopted faster settlement periods. The US moved to a shorter settlement time in 2017, with European participants trading with US counterparts already adopting the one-day settlement period.
The European Securities and Markets Authority (ESMA) has been collected data on the feasibility and impact of shortening settlement times. The data collection is taking place in close collaboration with industry and other stakeholders. The results of the data collection exercise will feed into the ESMA’s impact assessment report, which is expected to be published in Q3 2022.
The shorter settlement period is part of a wider set of measures aimed at enhancing the efficiency and resilience of European capital markets, known as the Capital Markets Union.
