The European Commission (EC) has launched a public consultation on post-trade infrastructure, which includes a proposal for a common settlement period across the region.
The consultation, which will run until 1 March with a view to publishing initial legislative proposals in June 2011, focusses on establishing a single regulatory framework for central securities depositories (CSDs) and harmonising key aspects of securities settlement processes.
CSDs hold responsibility for the registration, safekeeping, settlement of securities in exchange for cash and efficient processing of securities transactions.
The EC says the initiative, along with the European market infrastructure regulation it proposed for reforming the over-the-counter derivatives market and short-selling processes on 15 September and the MiFID review, will help to enhance the safety and soundness of the European financial system and ensure there is a common rulebook for important elements of securities infrastructure.
Under the proposals CSDs would fall under the supervision of the European Securities and Markets Authority, the pan-European regulatory body, which would be charged with maintaining a list of CSDs and keeping track of the activities they are licensed to carry out.
“Due to an increase in cross border investment over the last years, the European Commission considers that the time has come to install a common and binding regulatory framework for CSDs on a European level,” read the EC statement.
The consultation suggests adopting a T+2 settlement period across the region so that those countries already using short settlement periods are not required to move to a longer timeframe. Most European markets currently settle on a T+2 or T+3 basis. The paper also seeks comment on how to improve settlement discipline and ensure that trades are settled on the intended date.
The framework for CSDs suggested in the consultation incorporates the creation of common definitions for CSD services, rules on authorisation on the ongoing supervision of CSDs, prudential standards for CSDs and rules for access and interoperability.