France Urges Europe to Accelerate Work on Faster Stock Market Settlements
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Loading... - Maxim Sidorov
- 23 Jul 2024
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The Bank of France and the country's financial market regulator, the Autorité des Marchés Financiers (AMF), have called on Europe to expedite efforts to reduce the time required to settle stock trades. This move aims to help Europe catch up with Wall Street, which recently implemented similar reforms.
The joint statement from the Bank of France and the AMF concerns the transition to a T+1 settlement cycle, which will shorten the time needed to complete a stock trade on European exchanges from the current two business days to one. The goal is to enhance market efficiency and reduce risks associated with longer settlement periods.
Key Points from the Statement
- Call for Coordination: The AMF and the Banque de France emphasized the need for a well-coordinated and efficient transition to the T+1 settlement cycle across the European Union.
- Legislative Action: EU officials have indicated that legislation might be necessary to enforce this transition.
- Global Context: The United States implemented a T+1 settlement cycle for trades on US stocks and corporate bonds in May, a move designed to improve market efficiency. Canada, Mexico, and Britain are also adopting similar reforms.
The US Securities and Exchange Commission (SEC) has stated that faster settlements will enhance market efficiency, though it acknowledges that foreign investors will have less time to recall their US securities and gather the necessary funds for trading. This transition is part of a broader trend aimed at reducing counterparty risk and improving market liquidity.
The French statement emphasized the importance of timing the move to T+1 settlements in a manner that allows the EU to align with other major European jurisdictions, such as the UK and Switzerland, while providing sufficient time for the European financial industry to prepare for the transition.
The call from France's financial authorities underscores the urgency and importance of modernizing Europe's stock market settlement processes to enhance efficiency and competitiveness on a global scale. By moving to a T+1 settlement cycle, Europe aims to reduce risks, improve liquidity, and maintain its standing in the global financial market.
