The U.K. and Ireland will reduce the time it takes to settle equity trades to two days from three from next October, three months before the European Union is expected to make the shorter period mandatory.
Securities and cash will change hands on a so-called T+2 basis for all transactions carried out on the London Stock Exchange Group Plc (LSE), the Irish Stock Exchange, BATS Chi-X Europe and Turquoise from Oct. 6, 2014, according to a statement from Euroclear Bank SA, which acts as the central securities depository for the trading venues. Over-the-counter transactions remain exempt from the rule change.
The European Commission, the EU’s executive arm, plans to harmonize settlement times by Jan. 1, 2015. Regulators around the world have identified CSDs as systemically important institutions for the functioning of financial markets. CSDs, including Euroclear and Deutsche Boerse AG’s Clearstream arm, conclude transactions by ensuring the delivery of the securities against cash.
The commission has said the number of cross-border trades that aren’t properly settled exceeds the number of domestic ones that fail, meaning these transactions may pose a risk to financial stability in the 28-nation club of countries. More than 30 CSDs currently operate in the EU.
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