06 October 2014

International Capital Market Association: CSD Regulation - Migration to T+2

Markets within the scope of the CSDR text migrated from T+3 to T+2 with effect from Monday, 6 October 2014. The CSD Regulation states, in Article 5(2), that the migration should not apply to transactions that are privately negotiated and executed on a trading venue, or transactions that are executed bilaterally but are reported to a trading venue.

The ‘ICMA market’ refers to transactions in international securities, intended to be traded on an international cross border basis through an International central securities depository, which are often negotiated bilaterally and may be neither executed nor reported to a trading venue; it follows that these transactions will be out of scope for the CSDR. To allow for orderly trading of all fixed income securities traded under International Capital Market Association (ICMA) rules, ICMA will also change the standard settlement cycle set out in the ICMA Rules and Recommendations from T+3 to T+2 unless otherwise agreed; it is expected that agreement to a different settlement cycle will be recorded in writing at the time of trade.

With the move to T+2 for much of the European bond markets, this will have implications for related securities financing transactions (SFTs), including repurchase agreements. Currently, the most active settlement date for the near-leg of SFTs is T+2, one day shorter than the standard settlement date of the underlying security. Post T+2, in many cases, this is likely to move to T+1. However, SFTs remain completely flexible instruments with no standardized settlement date.

Full article on International Capital Market Association's website

ICMA Guide to Best Practice in the European Repo Market

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