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A government drive to boost the attractiveness of UK financial markets by reducing settlement times for trades has stalled because of divisions in the City of London over whether to align the new rules with the US or the EU.
A task force appointed by the Treasury is struggling to agree on a date to cut the time for finalising securities deals from the current two-day period to next-day settlement, according to four people with direct knowledge of the talks.
The stalemate, between businesses with US interests and those tilted towards Europe, has cast a shadow on one of the UK government’s “Edinburgh reforms” — a 31-point plan to try and make London a more attractive market to international investors after Brexit.
The Treasury has taken soundings from the City on whether reform of trade settlement could boost UK competitiveness and growth and bring it into line with the US and Canada. The unglamorous activity, where share and bond trades are finalised and ownership is legally transferred, was thrown into the global spotlight by the meme stock craze in 2021. North American markets are being modernised after a rush to buy stocks such as GameStop gummed up the market and led to complaints that the two-day window held up customers’ money for too long, increasing credit risks and slowing the pace of trading. The US and Canada will shift to single-day settlement next May, while India is also making a similar shift.
The UK Treasury has set up a committee of representatives from the City to steer the process. It is due to produce a progress report at the end of the year and final report by December 2024. The task force, headed by Charlie Geffen, a senior adviser at consultancy Flint, includes City trade bodies such as banking lobby group UK Finance and The Investment Association, which represents fund managers.
People involved in the discussions said the draft of the report had recommended the UK make the shift but it had not been submitted to the Treasury because of a difference of opinion on which of the two big financial markets it should follow. Discussions have grown “more heated than you might imagine . . . but in a very City gentleman type of way,” said one person who had seen a draft of the report...
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