European Council to exempt SFTs from T+1
07 May 2025 Europe
Image: Jean-Luc/stock.adobe.com
The European Council has confirmed the exemption of securities financing transactions (SFTs) from T+1 regulation ahead of Europe鈥檚 move to a shorter settlement cycle.
Member states鈥� representatives have approved the Council鈥檚 position on a proposal to shorten the settlement period for transactions in transferable securities.
According to the European Council, the goal is to shorten the settlement cycle on securities trades, such as transactions in shares or bonds, executed on EU trading venues from two business days to one business day after the trade date.
In respect of SFTs, the Council has now amended the original Commission proposal by exempting these transactions from the settlement cycle requirement.
SFTs are financial transactions that allow investors and firms to use assets such as the shares or bonds they own, to secure funding for their activities.
The decision to exempt SFTs from T+1 regulation was due to its 鈥渘on-standardised nature鈥� and the 鈥渘on-standardised settlement periods鈥� that may need to be agreed to by the parties to such transactions to achieve their objectives.
To avoid risk of circumventing the T+1 settlement cycle requirement, the Council says the exemption should only apply if SFTs are documented as single transactions composed of two linked operations.
Following the approval of the Council鈥檚 negotiating mandate by Coreper 鈥� otherwise known as the Committee of Permanent Representatives 鈥� the Council presidency can start interinstitutional negotiations with the European Parliament on this proposal to reach a common position.
Once agreed, the new rules will apply from 11 October 2027, the official implementation date for the EU鈥檚 move to T+1.
Leaders of the EU and UK move to a shorter settlement cycle, Giovanni Sabatini and Andrew Douglas, recently spoke to 麻豆传媒 Finance Times on their journey to exempt the use of SFTs within T+1 regulation.
Member states鈥� representatives have approved the Council鈥檚 position on a proposal to shorten the settlement period for transactions in transferable securities.
According to the European Council, the goal is to shorten the settlement cycle on securities trades, such as transactions in shares or bonds, executed on EU trading venues from two business days to one business day after the trade date.
In respect of SFTs, the Council has now amended the original Commission proposal by exempting these transactions from the settlement cycle requirement.
SFTs are financial transactions that allow investors and firms to use assets such as the shares or bonds they own, to secure funding for their activities.
The decision to exempt SFTs from T+1 regulation was due to its 鈥渘on-standardised nature鈥� and the 鈥渘on-standardised settlement periods鈥� that may need to be agreed to by the parties to such transactions to achieve their objectives.
To avoid risk of circumventing the T+1 settlement cycle requirement, the Council says the exemption should only apply if SFTs are documented as single transactions composed of two linked operations.
Following the approval of the Council鈥檚 negotiating mandate by Coreper 鈥� otherwise known as the Committee of Permanent Representatives 鈥� the Council presidency can start interinstitutional negotiations with the European Parliament on this proposal to reach a common position.
Once agreed, the new rules will apply from 11 October 2027, the official implementation date for the EU鈥檚 move to T+1.
Leaders of the EU and UK move to a shorter settlement cycle, Giovanni Sabatini and Andrew Douglas, recently spoke to 麻豆传媒 Finance Times on their journey to exempt the use of SFTs within T+1 regulation.
← Previous industry article
SFS: Industry leaders outline challenges related to mandatory central clearing
SFS: Industry leaders outline challenges related to mandatory central clearing
NO FEE, NO RISK
100% ON RETURNS If you invest in only one securities finance news source this year, make sure it is your free subscription to 麻豆传媒 Finance Times
100% ON RETURNS If you invest in only one securities finance news source this year, make sure it is your free subscription to 麻豆传媒 Finance Times
