The European Council has excluded securities financing transactions (SFTs) from the upcoming T+1 settlement requirement, marking a key change to the European Commission’s original proposal to shorten the standard securities settlement cycle.
Andrzej Domański
Under the proposal, the standard settlement cycle for transactions in transferable securities – such as shares and bonds traded on EU venues – would be shortened from T+2 to T+1.
SFTs, which allow market participants to raise short-term funding through temporary transfers of securities, were excluded due to their non-standardised nature and the bespoke settlement periods often negotiated between counterparties.
To prevent any regulatory loopholes, the Council clarified that the exemption will only apply if SFTs are documented as single transactions comprising two linked operations.
“A shorter settlement cycle of one day will make our capital markets more efficient,” said Andrzej Domanski, Poland’s minister of finance. “This is a concrete step to give heed to the calls to boost the EU’s competitiveness.”
With the Council’s position now established, inter-institutional negotiations with the European Parliament (trilogues) can now start. The final version of the legislation must be jointly agreed by both bodies before it is adopted.
If approved, the new rules will take effect from 11 October 2027, allowing time for market participants and infrastructures to make the necessary operational adjustments.
In March, The TRADE’s sister title, Global Custodian, spoke to Giovanni Sabatini, chair of the T+1 Industry Committee for Europe, where he discussed the next steps in the EU’s T+1 roadmap, the biggest challenges and just how mammoth the task is given the complexities of the continent’s sheer number of markets and infrastructures.