France urges Europe to step up work on faster stock market settlements

THE Bank of France and the country’s financial market regulator urged Europe on Monday to step up work on halving the time needed to settle a stock trade, which would allow Europe to catch up with Wall Street.

The joint statement from the Bank of France and the AMF regulator concerned the so-called T+1 settlement cycle, which will cut the time needed to complete a stock trade on European exchanges to one business day – T+1 – down from two at present.

“The Autorité des Marchés Financiers (AMF) and the Banque de France call for a well-coordinated and efficient transition to a T+1 settlement cycle for transactions on securities across the EU,” said their joint statement.

EU officials have said legislation may be needed for this halving of the time required to settle a stock trade in the European Union.

In May, regulation took effect in the United States whereby trades on US stocks and corporate bonds must now be settled in one business day after trading, instead of two.

The US Securities and Exchange Commission has said that this faster settlement will make markets more efficient, although foreign investors will have less time to recall their US securities and gather the dollars necessary to trade.

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Markets in Canada and Mexico are also adopting the reforms, which have been designed to reduce counterparty risk and improve market liquidity, and Britain is also planning to follow suit by the end of 2027 at the latest.

“The timing of the move should therefore be tailored in a way that makes it possible for the EU to move with other large European jurisdictions (for example, the UK and Switzerland, subject to a political agreement with these jurisdictions) while granting sufficient time to the European industry to get prepared,” the French statement added.