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CSSF: Countdown to halving settlement times on financial markets – European survey on T+1

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Countdown to Halving Settlement Times on Financial Markets: Insights from the European Survey on T+1

The financial landscape in Europe is on the brink of a significant transformation as the countdown to halving settlement times on financial markets approaches. This initiative, aimed at enhancing efficiency and reducing risks, is gaining traction among stakeholders. The European Securities and Markets Authority (ESMA) has conducted a comprehensive survey to gauge the readiness and perspectives of market participants regarding the transition to T+1 settlement cycles.

Key Findings from the Survey

  • Increased Efficiency: A majority of respondents believe that moving to T+1 will streamline operations and improve liquidity.
  • Risk Mitigation: Shorter settlement times are expected to reduce counterparty risk, a critical factor in today’s volatile markets.
  • Technological Adaptation: Many firms are investing in technology upgrades to facilitate the transition, highlighting the importance of robust systems.
  • Regulatory Support: There is a strong call for regulatory frameworks that support this shift, ensuring a smooth transition for all market participants.

Challenges Ahead

While the benefits of T+1 are clear, several challenges remain:

  • Operational Readiness: Firms must ensure their operations are fully prepared to handle the new settlement timelines.
  • Market Coordination: Effective collaboration among all market participants is essential to avoid disruptions.
  • Cost Implications: The transition may involve significant costs, particularly for smaller firms.

Conclusion

The move to T+1 settlement cycles represents a pivotal moment for European financial markets. As stakeholders prepare for this change, ongoing dialogue and collaboration will be crucial to address the challenges and maximize the benefits of this transition.

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