Frontpage News 2013 Shorter settlement...

Shorter settlement period for securities transactions

15 November 2013

Upcoming regulation from the European Commission promotes the efficiency of the securities market. 
 
EU countries must harmonise the settlement period for securities transactions to a maximum of two days after the trade date. Today, several countries, including Denmark, settle three days after the trade date.
 
The Danish Bankers Association believes that a harmonised European settlement period will promote the efficiency of the securities market. In general, the introduction of the two-day settlement is not assessed to be associated with major practical implications. The change will mean that the actual security management is shorter time to deadline for matching and transmission of instructions, which briefly may affect securities settlement negatively.

For the private investor, the harmonisation will mean that the usual securities trading with trade date from and including 6 October 2014 must be held two days after the trade date. This means that the purchase price or selling price respectively is deducted and deposited in the account two days after the trade date, not three days, which is market practice today.
 
The regulation requires harmonisation, with few exceptions, to be implemented by 1 January 2015, which is why several markets have already set a date for its implementation - including the Nordic markets (Denmark, Sweden, Norway and Finland). The bank- and brokers organisations are in consultation with the stock exchanges and CSDs, and have agreed to establish a settlement period of two days for securities transactions carried out from and including 6 October 2014. Markets in France, Belgium, the Netherlands and Portugal have already announced that they introduce two days of settlement from this date.

The requirement for settlement two days after the trade date is an absolute act on markets, i.e. regulated markets, multilateral trading facilities and the like, and will thus become the rule for the rest of the trade. This does not prevent the parties outside of a marketplace too agree otherwise.
 
Reference is made to the joint press release issued 14 November 2013 by the Nordic Securities Dealers Association, NSA.
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