Publication of the ESMA preliminary report on a potential T+1 in the European Union


Anticipating CSDR Refit and its obligation to produce a report detailing the timeliness, costs and benefits and modalities of implementing a T+1 settlement cycle, ESMA conducted during Fall 2023 a consultation on shortening the settlement cycle in Europe.

On 21 March 2024, the European regulator published its Feedback Statement setting out the 81 contributions received to its Call for Evidence and the initial lessons and findings it draws from them.

  • The switch to T0: this option was rejected by all and will not be retained by ESMA.

  • The shift to T+1: opinions are divided, some even questioning the value of this development  in order to improve the competitiveness or attractiveness of the European Union (EU).

  • This goes far beyond a simple adaptation of the settlement process of the transactions directly concerned, since the activities of lending/borrowing, market making, foreign exchange or the primary of funds would be affected. Market infrastructure should also make some adaptations.

  • ESMA points out that, however, improving the quality of the outcome remains at the heart of its priorities and that many of the prerequisites mentioned for a T+1 transition would serve this purpose.

  • Alignment (or non-alignment): Coordination within Europe (EU, UK and Switzerland) is seen as beneficial.

  • Finally, a first estimate (which remains to be validated) gives a minimum delay of 32 months for an implementation of the T+1.

The paper details ESMA’s plans to refine its analysis, such as meeting with APAC investors and closely monitoring the north American transition (U.S. and Canadian).

The final report is expected to be submitted to the European Commission by the end of 2024 (the deadline is mid-January 2025, one year after CSDR Refit came into force).