Europe adapting well to T+2
15 October 2014 London
Image: Shutterstock
The transition to settlement at T+2 for the European fixed income markets has been largely successful with few issues, according to the International Capital Market Association (ICMA) and the ICMA European Repo Council (ERC).
Commenting on the migration to T+2 Godfried De Vidts, Chair of ICMA鈥檚 ERC, said: 鈥淔eedback from ICMA and ERC members suggests that there were very few issues or incidents on the migration settlement date of 8 October. Netting and pair-offs across trades transacted on 3 and 6 October meant that settlement volumes on 8 October only increased by around 50 percent.鈥�
鈥淢arket-wide efforts to ensure timely affirmation and allocations resulted in only around 1 percent of total traded volumes mismatching and subsequently requiring post-trade repair.鈥�
According to De Vidts, settlement efficiency levels have also remained high during the migration, with only a 鈥渘egligible鈥� uptick in settlement fails on 8 October and no observable issues with agent and clearing funding, bottlenecks, and settlement cycle events.
From the perspective of the repo markets, the shorter-settlement cycle for underlying securities, and the migration of liquidity for most financing trades from T+2 to T+1, has not posed any immediately observable issues.
De Vidts added: 鈥淭he ERC will continue to monitor the situation closely, particularly the impact of increased volumes in same-day collateral and liquidity management.鈥�
The success has been attributed to the significant efforts made by the relevant market trade bodies, regulated markets, multilateral trading facilities, and data vendors, both on trading venues and in the over-the-counter markets, as well as raising awareness and preparedness amongst market participants.
Commenting on the migration to T+2 Godfried De Vidts, Chair of ICMA鈥檚 ERC, said: 鈥淔eedback from ICMA and ERC members suggests that there were very few issues or incidents on the migration settlement date of 8 October. Netting and pair-offs across trades transacted on 3 and 6 October meant that settlement volumes on 8 October only increased by around 50 percent.鈥�
鈥淢arket-wide efforts to ensure timely affirmation and allocations resulted in only around 1 percent of total traded volumes mismatching and subsequently requiring post-trade repair.鈥�
According to De Vidts, settlement efficiency levels have also remained high during the migration, with only a 鈥渘egligible鈥� uptick in settlement fails on 8 October and no observable issues with agent and clearing funding, bottlenecks, and settlement cycle events.
From the perspective of the repo markets, the shorter-settlement cycle for underlying securities, and the migration of liquidity for most financing trades from T+2 to T+1, has not posed any immediately observable issues.
De Vidts added: 鈥淭he ERC will continue to monitor the situation closely, particularly the impact of increased volumes in same-day collateral and liquidity management.鈥�
The success has been attributed to the significant efforts made by the relevant market trade bodies, regulated markets, multilateral trading facilities, and data vendors, both on trading venues and in the over-the-counter markets, as well as raising awareness and preparedness amongst market participants.
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