On 5 October 2023, the European Securities and Markets Authority (ESMA) published a Call for Evidence (CfE) on shortening the settlement cycle.

In 2014, the Central Securities Depositories Regulation (CSDR) introduced, for the first time in the EU, a requirement for all transactions in transferable securities which are executed on trading venues to be settled by no later than the second business day after the trading takes place (commonly referred to as a “T+2” settlement cycle). Due to recent developments, the question of shortening the securities settlement cycle has emerged.

Through this CfE, ESMA is seeking to collect stakeholders’ views as well as quantitative evidence to form a better understanding of the issue and help ESMA to then produce an assessment of the costs and benefits linked to the potential reduction of the securities settlement cycle in the EU. In parallel to this CfE, ESMA is consulting central banks as well as the TARGET2-Securities (T2S) operator on what would be the impact of a shorter settlement cycle for the operation of T2S.

In this CfE, ESMA is seeking feedback on the following issues:

• What would be the impact of the reduction of the securities settlement cycle in the operations of market players.
• What would be the benefits and the costs that a shorter securities settlement cycle would bring.
• If it is concluded that a mandatory shorter settlement cycle should be imposed, how and when a shorter settlement cycle could be achieved.
• What are the impacts on the EU’s capital markets resulting from international developments related to securities settlement.

The deadline for feedback to the CfE is 15 December 2023, following which, ESMA will publish and submit to the European Commission a feedback report with its main findings in the course of 2024.