E.U. – AFME Shortening EU Settlement Cycles

E.U. – AFME Shortening EU Settlement Cycles

On Sep. 21, AFME called for industry discussion on shortening cycles in Europe


  • New paper discusses if Europe should move to 1-day settlement cycle (known as T+1).
  • Current settlement for most transactions in equities, fixed income markets is (T+2).
  • Post announcements by US, other of intention to move to shorter settlement cycles.
  • The move would follow historic trend towards shorter settlement cycles, could result in reduced market risk and associated costs.
  • Move to T+1 could be most challenging migration yet as it would remove only business day between trading-settlement, create significant pressure on post-trade operations.
  • Such move in settlement terms would affect particularly global participants.
  • Rushed/uncoordinated approach likely to result in increased risks, costs, inefficiencies.
  • Particularly given unique nature of EU markets as they have multiple different market infrastructures and legal frameworks.
  • Should set up task force to conduct detailed assessment of benefits, costs, challenges.

Key Aspects

  • T+1 Settlement in Europe: Potential Benefits and Challenges paper highlights the key benefits of moving to a shorter settlement cycle including reduction of risk.
  • Significant reduction of associated costs and maintaining global alignment.
  • As barriers to overcome pre-migration cites post trade activities compressed into shorter time frame; possible increase in settlement fails.
  • Greater operational complexities for global participants; securities lending impact.
  • Impact on Exchange Traded Funds (ETFs), securities-based derivatives more important
  • AFME cautions that successful migration will require coordinated industry effort, from initial impact assessment through to development of a detailed implementation plan.