Brussels: The European Commission welcomes the political agreement reached this week by the European Parliament and the Council on the amendment of the Central Securities Depositories Regulation (CSDR) to shorten the settlement cycle in the EU from two days to one by 11 October 2027.
According to Cyprus News Agency, a press release by the European Commission explains that settlement involves the process through which the buyer receives the security, such as shares or bonds, and the seller receives the cash. The settlement cycle is defined as the period between the trade date (‘T’) and the settlement date, which is when the buyer receives the securities and the seller receives the payment.
“This legislative amendment will shorten the settlement cycle of securities executed on EU trading venues, from two days (‘T+2’) to one day (‘T+1’) after the trading takes place,” the release states.
The commission highlights that transitioning to T+1 will bring significant benefits by enhancing efficiency and increasing the resilience of EU capital markets. It will also aid in developing deeper and more liquid capital markets, aligning with the key objectives of the Savings and Investments Union (SIU).
Additionally, the shorter settlement cycle will reduce the duration of risks faced by buyers and sellers, and investors will receive the money or securities they are owed more swiftly. The move will also eliminate the costs associated with the misalignment of settlement cycles between the EU and other jurisdictions that have already adopted T+1.
The amendment provides legal certainty on the date of the transition to T+1 in the EU, ensuring a unified approach and allowing market participants ample time to prepare for the change.