The European Securities and Markets Authority (ESMA) has proposed mandatory electronic communication channels as part of its updated guidelines to support the transition to a T+1 settlement cycle.
- The European Securities and Markets Authority (ESMA) has proposed mandatory electronic communication channels as part of its updated guidelines to support the transition to a T+1 settlement cycle.
This move is a significant part of ESMA’s strategy to streamline post-trade communication across the European Union. The shift to a T+1 cycle will allow the transfer of securities to the buyer and payment to the seller to be completed within a single business day after a trade is executed. This change will notably reduce the current two-day settlement period.
In its latest consultation, ESMA aims to make the communication process faster, more consistent, and clearer for all market participants. The proposed updates are designed to help firms comply with stricter timelines associated with the T+1 settlement cycle.
A key aspect of the proposed guidelines is the mandatory adoption of electronic, standardised communication channels, along with adherence to international messaging standards. By emphasising electronic methods, ESMA seeks to eliminate the ambiguity and delays that can arise from non-electronic communication, such as oral allocations and confirmations, which will only be permitted in cases of temporary technical disruptions.
The new guidelines are set to take effect on December 7, 2026, just ahead of the regulatory requirements for allocations and confirmations under the Regulatory Technical Standards on Settlement Discipline, which are due to be implemented on October 11, 2027.
ESMA has opened the consultation process to gather feedback from stakeholders, ensuring they have ample opportunity to adapt their operational frameworks before the final guidelines are published. Interested parties have until July 7, 2026, to submit their responses, after which ESMA will review the feedback and expects to release the final report by October 2026.
As the regulator emphasises the importance of industry readiness for this transition, market participants are encouraged to begin preparations well in advance of the impending deadlines. This proactive approach is crucial for a seamless transition to the new T+1 settlement cycle.
