Post-Trade Forum 2024 – The Highlights

Movement is finally happening on T+1 in Europe.
After months of industry consultations and intense speculation, the European Securities and Markets Authority (ESMA) announced it would be targeting October 11, 2027 as the provisional go live date for T+1 across the EU-27.  

This particular date was chosen, according to ESMA, because it avoids the usual difficulties of implementing major market change projects in November and December, while it also misses the first Monday of October, which falls just after the end of Q3.¹

Keen to minimize the risk of market fragmentation, an industry expert at the Forum confirmed that the UK would mirror the EU’s plans by also rolling out T+1 on the same day.
With the EU and the UK seemingly aligned on T+1 timings, all eyes are now on Switzerland. 

“Even though it has not been formally confirmed yet, I am incredibly confident that Switzerland will introduce T+1 on the same day as the EU and the UK. SIX has long been a driving force advocating that all three major European markets, namely the EU, the UK and Switzerland, each introduce T+1 simultaneously,” said Javier Hernani, Head Securities Services, SIX.

North America’s transition to T+1 was not easy by any stretch, but the EU faces a much greater challenge altogether, according to speakers at the Post Trade Forum.

Whereas the US has just one Central Securities Depository (CSD), i.e. the Depository Trust & Clearing Corporation (DTCC) and five Central Counterparty Clearing Houses (CCPs), of which two are DTCC subsidiaries, Europe has 30+ competing  CSDs and 18 CCPs.  
This over-saturation of financial market infrastructures (FMIs) risks making T+1’s adoption incredibly complicated across the EU 27, at least relative to, say,  the US, the UK and Switzerland.

While a big bang introduction of T+1 in the EU will be tough, Jesús Benito, Head Domestic Custody and TR Operations, at SIX, is optimistic it can be done providing the industry collaborates. 

“For T+1 to happen smoothly in the EU, the region’s CSDs need to coordinate with each other on the transition. Just as the DTCC played an active leadership role in supporting the US transition to T+1, so too must EU CSDs,” he added.
With 2.5 years to go until T+1 take effect in Europe, speakers urged the industry to use this time to begin planning and automating their back offices.

Most significantly, Benito said that barriers or “national specificities” between member states should be ironed out ahead of T+1. By having a harmonized EU regulatory framework, the T+1 transition will be more straightforward, continued Benito.

Speakers also highlighted that the short-term pain of implementing T+1, i.e. the higher borrowing costs to meet FX funding requirements, etc., would be worthwhile in the long-run, as the reforms will ultimately usher in lower margining costs and shorter settlement duration risk for market participants.

Post-trade market reforms could have a major impact on the traditional CCP operating model.

T+1 and cutoff times

On T+1, a speaker noted that while CCPs are fully prepared for the lower margining costs which shorter settlement cycles will bring, there are concerns about cutoff times.
For instance, a report from Finextra says that if some European exchanges offer extended trading hours, Target2Securities’ (T2S) night settlement may have to be delayed, enabling CCPs to net all trades after close of trading hours and send instructions to T2S.²

The report continues that if T2S’s night settlement cannot be delayed for whatever reason, CCPs may have to think about netting trades with cut-off in the evening of T date,  and additional netting for trading after cutoff.³ “The issue of cut-offs is being discussed by CCP market participants, and it is certainly a challenge for the industry,” said Laura Bayley, Head of Clearing Services, SIX.

Digesting the Draghi Report

In order to stimulate EU competitiveness and accelerate the Capital Markets Union (CMU), the recently released Draghi Report said there needs to be less regulatory fragmentation, and called for the centralization of all clearing and settlement within the EU. Embedded within the Draghi report was a proposal to create a single CSD and CCP for the whole EU, ideally through consolidation.

Not everyone at the Post-Trade Forum was  happy with this suggestion. One speaker said the idea of creating a monolithic CCP for the entire EU was not pragmatic, warning such a move could actually undermine competitiveness, particularly around pricing.

Regulations are coming in thick and fast.
In the EU, the European Market Infrastructure Regulation 3.0 (EMIR 3.0), now requires EU firms trading euro or Polish Zloty denominated OTCs to have an active account with an EU CCP. 

Next on the regulatory horizon, said Bayley, are proposals from the US Securities and Exchange Commission (SEC) mandating that a large proportion of the US Treasury cash and repo markets be centrally cleared from 2025 and 2026 respectively.  

The SEC’s rules are extraterritorial in nature and will have a significant impact on European financial institutions, especially those organizations who are not members of the Fixed Income Clearing Corporation (FICC), a DTCC subsidiary which clears US government securities, or firms who may be trading on a sponsored access basis, commented one speaker.

Regulators show no sign of loosening their grip either , and this - once again - reinforces the importance of working with third-party providers, such as SIX who can support firms with their various operational needs and collateral management requirements.

“Post-financial crisis regulations, including mandatory clearing and uncleared margining rules have put an enormous emphasis on collateral and repo. We do not see industry demand for collateral falling anytime soon,” said Christian Geiger, Head Clients & Products Securities Finance, SIX.

Other themes covered during the Post Trade Forum included the ongoing debate about interoperability versus preferred clearing at CCPs , together with the recent rise of self-clearing.
Although interoperability offers plenty of cost synergies, speakers said it is facing mounting competition from the preferred clearing model, a set-up where both counterparties to a transaction must select their preferred CCP.

While preferred clearing is also competitive on pricing, there is no guarantee a trade will be cleared at a particular counterparty’s preferred CCP. However, in jurisdictions where interoperability is not available, CCPs – such as SIX– will sometimes offer the preferred CCP model to their clearing members, and it has done so in the Euronext markets.

Another speaker noted they had seen a notable uptick in the number of organizations choosing to self-clear their trades, adding that the barrier to entry is not as onerous operationally as it once was. For some firms, self-clearing is an attractive option as it gives them more autonomy and can reduce dependencies (and costs) on third parties. 

Digital assets are slowly gaining momentum, but a few things need to happen first if they are to properly scale.
Together with having robust infrastructures in place supporting the issuance, trading, custody and settlement of digital assets, the regulatory and legal environment also needs to be conducive for innovation to thrive. 
This appears to be happening in a lot of major markets. 

One speaker said the UK Law Commission, a statutory body entrusted with reviewing the country’s laws, had recently put forward a draft bill on digital assets as personal property.   In effect, this draft acknowledges  that digital assets should not be prevented from being treated as property because they do not fall within the existing categories of property.⁴
This move is likely to boost the UK’s attractiveness as a jurisdiction for trading digital assets.

Michele Curtoni, Head Strategy & New Business, SIX Digital Exchange (SDX), cited the establishment of the EU’s DLT Pilot Regime as another positive example of regulation supporting digital asset growth . The DLT Pilot Regime provides a legal framework for trading and settling transactions involving digital assets which qualify as financial instruments under the Markets in Financial Instruments Directive II (MiFID II).   

Meanwhile, Curtoni added that recent political developments in the US should also result in a friendlier regulatory environment for digital assets moving forward.  
As such, expect there to be some seismic changes in the digital asset universe from next year.

Across clearing, settlements and digital asset trading, a massive transformation is underway, and this is expected to continue as we move into 2025. Attended by 180 people, SIX’s Post-Trade Forum provided attendees with an excellent day of vibrant thought leadership and networking opportunities.

The event will return to London on 4 December 2025.

^{[1] ESMA – November 18, 2024 – ESMA proposes to move to T+1 by October 2027
[2] Finextra- September 2, 2024 - Transition to T plus 1 settlement in UK, EU, and other markets – Implications for the industry
[3] Finextra- September 2, 2024 - Transition to T plus 1 settlement in UK, EU, and other markets – Implications for the industry
[4] Norton Rose Fulbright -  September 6, 2024 - Law Commission publishes revised Bill on digital assets as personal property}

• SIX Securities Services
• Discover SIX Securities Services Video