Settlement efficiency is a central topic of discussion for regulators in European markets and improving it remains a top priority. Their key objective is the safe and efficient operation of the financial markets and trade fails create both uncertainty and risk. The CSDR Settlement Discipline Regime introduced in 2022 brought the imposition of cash penalties to incentivise the market to improve efficiency.
Boosting settlement efficiency
With Europe expected to follow the US move to T+1, there is an increasing need for resolving issues in near real time on T+0, more process automation, and more efficient workflows across middle-office, back-office and local markets.
We recognised the challenges of improving settlement efficiency, and in 2023 created a working group with members of the Euroclear Bank User Committee to focus on settlement efficiency and propose steps we can take as a community, collectively to improve settlement efficiency.
The working group analysed the huge amount of data Euroclear has on settlement efficiency throughout the settlement life cycle, identifying the key pinch points in the process, but also the best practices employed by those organisations that outperform their peers and have minimal fails.
Starting in April 2024, the initiative launched a series of activities to raise market awareness of these drivers, their underlying causes and how they might be addressed. The initiative will continue throughout 2024 and beyond, with the aim of setting tangible targets for improving settlement efficiency across the market overall and support individual organisations in their efforts to improve their own performance.
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.
Trade matching is the vital first step in the settlement journey as subsequent steps cannot proceed until it is successfully completed. Improving trade matching efficiency will have a large impact on reducing CSDR penalties. Once matched, partial settlement can help mitigate trade fails by delivering available collateral when the trade cannot be settled in full, reducing CSDR penalties. These topics ae covered in details in the videos and guides.
Future articles and videos will focus on the subsequent steps in the settlement process and how they, in turn, can be improved. At every stage there will be suggestions for improvements, and targets for observed settlement efficiency within Euroclear ecosystem so progress can be monitored and reported.
Join us in this initiative to drive up settlement efficiency across the markets, reducing both the uncertainty and risk and importantly reducing costs too.