13 October 2021

Bloomberg: EU in Talks to Delay Reforms for $61 Trillion Securities Market

ESMA has urged Brussels to push back reforms from February... Changes could raise costs and threaten liquidity, critics say

Officials from European Union member states will meet on Wednesday to discuss calls to delay sweeping reforms that threaten to drive up costs in Europe’s settled-securities market.

Brussels is facing pressure from lobby groups to postpone the February start date of changes designed to help make settling securities safer and more efficient in the bloc. Under the proposals, if one party fails to deliver a security as planned, the other side will be able to buy it independently then pass the cost back to the original counterparty, according to Ashley Rowlands, managing associate at Linklaters LLP. 

This process is currently voluntary, but would become mandatory, he said.

The measures have sparked pushback from industry groups, the European Securities and Markets Authority and Italian officials, amid concerns that firms are unprepared and that the changes could threaten the bloc’s competitiveness. There were more than 53 trillion-euro ($61 trillion) worth of securities in EU securities settlement systems at the end of 2019, according to European Central Bank data cited by the European Commission.

‘Truly Problematic’

ESMA called for a delay in September and said the reforms were causing companies “serious difficulties.” It’s waiting for further clarity from the Commission, and the ball is in their court, according to a spokeswoman for the regulator.

And the Italian delegation to the working group has said the reforms are “truly problematic” and could increase pressure on liquidity in the market, as well as drive up the cost of certain securities, according to a working paper dated Monday....

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