European Commission legislative proposal for shortened settlement cycle in EU

The European Commission (EC) has published a legislative proposal it has adopted for a Regulation amending the Central Securities Depositories Regulation (CSDR) to shorten the settlement cycle for EU transactions in transferable securities.

The proposed Regulation shortens the settlement period under Article 5(2) of the CSDR from two business days after trading takes place (T+2) to one business day (T+1). The proposal is intended to: (i) promote settlement efficiency and increase the resilience of EU capital markets; (ii) improve the liquidity of EU capital markets; and (iii) eliminate the costs linked to the misalignment of settlement cycles between EU and other jurisdictions. Due to the urgency to act given international developments, the EC has also prepared a Commission Staff Working Document alongside this proposal, analysing the impacts of an EU move to a shorter settlement cycle. The document assesses the costs and benefits of a shorter settlement cycle in the EU, highlighting that the mostly one-off costs should, over time, be outweighed by the long-term benefits of lower counterparty and market risks, more efficient and timely settlement and increased attractiveness of EU capital markets for investors. The EC has also published a set of FAQs alongside its proposal. The proposed Regulation will enter into force on the 20th day following its publication in the Official Journal of the EU and will apply from 11 October 2027.

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