ESMA proposes key reforms to settlement discipline
14 October 2025 Europe
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The European Securities and Markets Authority (ESMA) has published its final report, recommending significant amendments to the regulatory technical standards on settlement discipline.
These changes aim to enhance settlement efficiency across the EU, facilitate the transition to a shorter settlement cycle (T+1) by 11 October 2027, and reduce the administrative burden on central securities depositories (CSDs) and market participants.
Designed to improve operational readiness for the EU financial industry, these changes include same-day (trade date) timing for trade allocations and settlement instructions, in addition to machine-readable formats for allocations and confirmations.
It also involves mandatory implementation of key functionalities such as hold and release, auto-partial settlement, and auto-collateralisation; as well as updated provisions for the monitoring and reporting of settlement fails.
ESMA says a phased-in implementation schedule, beginning in December 2026 and concluding by 11 October 2027, intended to ensure a smooth transition to the new regime.
Market infrastructures, financial intermediaries, and their clients are encouraged by the authority to treat these regulatory changes as a central element of their T+1 transition strategy.
Commenting on the news, James Pike, chief revenue officer of Taskize (a Euroclear company), says: 鈥淭he ESMA report highlights a big shift in the market and will require firms to move processes to an earlier point in the processing cycle to meet T+1.
鈥淭hese changes will need to be supported by a number of wholesale processes and technological changes which will require industry collaboration utilising technology solutions to drive real change both internal to organisations but across the industry participants.鈥�
The draft amendments have been submitted to the European Commission, which has three months to decide on their adoption.
These changes aim to enhance settlement efficiency across the EU, facilitate the transition to a shorter settlement cycle (T+1) by 11 October 2027, and reduce the administrative burden on central securities depositories (CSDs) and market participants.
Designed to improve operational readiness for the EU financial industry, these changes include same-day (trade date) timing for trade allocations and settlement instructions, in addition to machine-readable formats for allocations and confirmations.
It also involves mandatory implementation of key functionalities such as hold and release, auto-partial settlement, and auto-collateralisation; as well as updated provisions for the monitoring and reporting of settlement fails.
ESMA says a phased-in implementation schedule, beginning in December 2026 and concluding by 11 October 2027, intended to ensure a smooth transition to the new regime.
Market infrastructures, financial intermediaries, and their clients are encouraged by the authority to treat these regulatory changes as a central element of their T+1 transition strategy.
Commenting on the news, James Pike, chief revenue officer of Taskize (a Euroclear company), says: 鈥淭he ESMA report highlights a big shift in the market and will require firms to move processes to an earlier point in the processing cycle to meet T+1.
鈥淭hese changes will need to be supported by a number of wholesale processes and technological changes which will require industry collaboration utilising technology solutions to drive real change both internal to organisations but across the industry participants.鈥�
The draft amendments have been submitted to the European Commission, which has three months to decide on their adoption.
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