Our settlement efficiency initiative proposes tangible steps we can collectively take as a community, to improve settlement efficiency across the industry. The key to unlocking market efficiency is community adoption of the best practices put forward by the Euroclear Bank User Committee settlement efficiency working group.
Update on Euroclear’s settlement efficiency initiative
As a financial market infrastructure, we are committed to partnering with our ecosystem to improve settlement efficiency for the benefit of the market. Launched in April 2024, our settlement efficiency initiative created a series of activities to raise market awareness of the drivers behind settlement inefficiencies, the underlying root causes of settlement fails and how they might be addressed. Reducing settlement failures leads to reduced market risk and financial impact, whilst also supporting preparations for the upcoming transition to a shortened T+1 settlement lifecycle.
The initiative kicked off with It all starts with a match , focusing on the first step in the Euroclear Bank settlement process and one key root cause of settlement inefficiencies.
We are delighted that so many clients embraced the initiative, working with us bilaterally to improve their own matching efficiency, based on our observations of the root causes of matching fails and developing action plans to mitigate them. Our collaborations led to significant improvements for many firms, with an overall 23% decrease in matching-related issues across the settlement lifecycle of instructions and consequently helped industry performance improve too.
A key part of the initiative was to set ambitious goals for improvements. At the start of 2025, we would like to report progress on those goals.
In June, the client partial release functionality was introduced, a major improvement for omnibus account holders. This feature allows clients to release portions of delivery instructions previously set ‘on hold’, facilitating partial settlement and avoiding stock pilfering on omnibus accounts.
We are delighted to announce that five major custodians are already active with the new functionality, benefiting 164 counterparties.
In September, we have, in collaboration with Clearstream Banking Luxembourg, increased the number of partial runs for Bridge settlement to align with our internal settlement offering.
This has had a direct positive impact on the intraday settlement velocity over the Bridge.
Another notable achievement was the expansion of our partial settlement services to the Italian market. By becoming a Directly Connected Party, our clients can benefit from partial settlement on deliveries to the Italian market.
Since the launch, we have already noticed a 5% increase of partial settlement in this market.
With Efficiency Unlocked: The Advantages of partial settlement, the second chapter of our settlement efficiency campaign, we put forward best practices around the adoption of partial settlement.
We had set an ambitious target of 85% of instructions eligible for partial settlement by the end of 2024. Following our 2024 service enhancements, the overall eligibility in volume for partial settlement remained stable: 75% of instructions are eligible for partial settlement, while in value, it has increased to 87%. We observe that the eligibility in volume of Delivery Versus Payment (DVP) transactions is much higher than for Free Of Payment (FOP) transactions with 91% for DVPs and 39% for FOP.
Even though eligibility has stayed broadly the same, we have still seen an increase in the volume and value of eligible instructions that trigger a partial settlement. This amounts to an average in volume of 13% and 37% in value, contributing to 2% (in value) of the end-of-day settlement efficiency.
We will continue our engagement with clients around settlement efficiency through the Settlement Efficiency Working Group and prioritise working bilaterally with clients who have the biggest impact on Euroclear Bank’s CSDR Fails Ratio.
We will help these clients identify specific focus areas and critical points in their own processes, compare their practices to those of the highest performing clients we see in our settlement system, and work with them to improve their processes and reduce inefficiencies. By working together, we can help increase settlement efficiency and bring down both their individual and wider industry costs.
In preparation for the transition to T+1 in Europe, confirmed for 11 October 2027, we have decided to reinforce and sharpen our matching performance ambitions.
For 2025, we aim to achieve 95% of instructions matched by the end of T+1, adding to the existing benchmarks. We observe that the highest performing clients in matching efficiency terms instruct on trade date, take advantage of hold and release when operating through omnibus accounts to receive early matching feedback, and have highly automated processes. These best practices form the basis to help us achieve our matching goals.
2024 underscored the importance of community adoption and the need to address opt-out behaviors (mainly on the receipt side) to maximise settlement efficiency.
For 2025, we want to reinforce our objective of reaching 85% partial settlement eligibility. Continued collaboration and targeted efforts will be essential to reach this objective. We observe that, at transaction level for internal settlement, around 8% of receivers still opt-out of partial settlement. This is considered an area for improvement.
Throughout 2025, we will launch further enhancements to our matching products and services to help you to instruct right first time.
Our Single Matching Account capabilities will be extended to new issue distributions, simplifying complex account structures to enable your counterparties to use the same Standard Settlement Instruction (SSI) details for all their transactions with you.
We will introduce auto-matching for FOP internal settlement to avoid matching issues and the need for bilateral cancellation of instructions that are under your control.
We will also help you to speed up your issue resolution, with the implementation of extra validation rules that give you instant feedback on instructions that may be incorrect.
For our EasyFocus matching predictions report, we will increase the frequency of the report and add predictive reasons for unmatched transactions throughout the day.
We are pleased to confirm that in 2025, we will enhance our client partial release service by launching the possibility to partially release your instruction via EasyWay.
If you are an existing client, contact your Relationship Manager to discuss the initiative.
If you are new to Euroclear, contact us to learn about the full range of services we can offer to help you manage your business.
