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The T2S platform, which has experienced several setbacks since work started in 2006, is due to go live in June 2015 and will offer delivery versus payment settlement in central bank money.
In the meantime, the European Parliament and Council of the European Union are reviewing draft legislation to create a common framework for the authorisation and supervision of securities depositories. First published in March 2012, the CSD Regulation aims to standardise several aspects of securities settlement, including settlement cycles of T+2 (two days after the transaction), settlement discipline and market access.
Speaking during a recent European Central Bank conference on post-trade harmonisation in Europe, Patrick Pearson, head of financial markets infrastructure at the European Commission, said the CSD Regulation was “absolutely critical – it is the missing link”. He added: “We’ve regulated the trade repositories, we’ve regulated the clearing houses, and now we need to regulate the CSDs, so that the whole chain from top to bottom is regulated. Issuer choice – which CSDs they issue their securities in, for instance – is absolutely critical, and the second pillar is just as important: we need the CSD Regulation in place to be able to get T2S up and running. They go hand in hand, so it is an absolutely vital piece of legislation.”
Paul Symons, head of public affairs at clearing house Euroclear, believes the move to harmonise settlement discipline set out in the CSD Regulation is a significant structural change for the market. He said: “The only way a CSD can manage this is by building an automated settlement discipline system. Combined with the changes required for T2S and other CSDR changes, it will consume a great deal of IT resources at CSDs.”
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