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According to the Newsletter (3 July 2025) of the Directorate-General for Financial Stability, Financial Services and Capital Markets Union, a shorter settlement cycle for transactions in transferable securities traded on the EU-wide venues would reduce operations from two business days to only one business day: however, the proposed effective date is expected to occur in a couple of years. Shortened cycle will also make the EU-27 capital markets more efficient and competitive, in line with the objectives of the expected Savings and Investment “sub-Union”, SIU.
Background
The Commission adopted a new SIU’s strategy in Spring 2025, as another EU-wide “sub-union” alongside recent digital, innovation, skills, etc. “unions”. The main idea was to improve the way the EU financial system channels available savings for increasing productive investments.
Presently primary strategy’s actions are aimed, however, at conducting a “fruitful dialogue with all stakeholders… in boosting competitiveness in the EU economy, with the most impactful actions being given priority in 2025”, as Commission noted.
Still, fruitful SIU’s implementation rests on both the EU institutions’ legislative and non-legislative measures, as well as on actions in the member states (that is combining private and public sectors); in the second quarter of 2027, the Commission will publish a mid-term review of the overall progress in achieving the SIU.
More on SIU in: https://www.integrin.dk/2025/03/20/new-eu-initiatives-for-investment-and-innovation/
As to the “settlement” concept in the EU law (as well as generally in the financial sector), it is the process through which the buyer of a security (e.g. a share or a bond) receives the security and the seller of that security receives the payment. The period of time between the moment the trade takes place (known as the ‘trade date’, or simply ‘T’) and the settlement date for transferable securities traded on trading venues and settled in securities settlement system is commonly referred to as the settlement cycle. Under the present agreement, the length of the settlement cycle will be shortened from the so-called current ‘T+2’ to ‘T+1’. In practice this means that an investor buying/selling an EU share or bond on an EU trading venue will receive that share or bond/cash one “business day” earlier.
Source and citation from: https://finance.ec.europa.eu/news/shorter-settlement-cycle-2025-07-03_en
On the EU savings and investment “sub-union”
European savings and investments union (SIU) aims to create better financial opportunities for EU citizens, while enhancing our financial system’s capability to connect savings with productive investments; the initiative was launched in May 2025.
This “sub-union” will lead to more choice for savers who wish both to grow their household wealth and allow businesses flourish in the EU member states.
The SIU is a horizontal enabler that is expected to create a financing ecosystem that would benefit investments in the EU’s strategic objectives. Europe’s capacity to address current challenges – such as climate change, rapid technological shifts and new geopolitical dynamics – demands significant investments, which the Draghi report (more on Draghi report below) estimates at an additional €750‑800 billion per year by 2030, and which is further impacted by increased defence needs.
Much of these additional investment needs relate to SMEs and innovative companies, which cannot rely solely on bank financing. By developing integrated capital markets – alongside an integrated banking system – the SIU can effectively connect savings and investment needs.
More on SIU in the following Commission web-link: https://finance.ec.europa.eu/regulation-and-supervision/savings-and-investments-union_en.
Generally on the issue in the following related web-links: = Capital markets union; = Banking union; = Retail financial services; = Financial markets.
EU’s regulatory guidance in finance
The European Securities and Markets Authority (ESMA) is the EU’s financial markets regulator and supervisor: i.e. the 2023-2028 strategy guides ESMA in its second decade. It builds on the successful development of ESMA since its establishment and reflects the evolving environment in which it operates.
Thus, ESMA acts as: – a regulator developing regulatory guidance to supervisors and regulated entities within its remit and drafting proposals for legally binding technical standards; – a promoter of supervisory convergence and coordination undertaking peer reviews, organising trainings, facilitating common supervisory actions, developing common EU supervisory priorities; – a direct supervisor of a subset of financial infrastructures and service providers; – a market monitor carrying out stress tests and publishing reports and research about risks to investors and financial stability; – a data and information hub providing infrastructure and data quality control of regulatory data used by supervisors and market participants; – a defender of EU common interests in international fora and in relation to non-EU supervisors, promoting common global standards and dialogue with third-country markets and securities supervisors; and – a technical advisor to the Commission, Parliament and Council in matters of securities and market supervision by publishing technical advice, opinions and reports.
Reference and citation from: https://www.esma.europa.eu/esmas-activities
The proposal’s legislative cycle
The SIU’s legislative text (already agreed by the Parliament and the Council) follows the Commission proposal adopted in February 2025, which was based on the recommendations set out in a report prepared by the European Securities and Markets Authority (ESMA) and on the input gathered from EU public and private stakeholders.
Although the political agreement between two main EU legislative institutions has agreed with the main elements of the Commission’s proposal (i.e. the move to T+1 trade date), it deviated from that proposal in its scope, as a vital element in the proposal. Thus, the Parliament and the Council agreed to exempt certain types of transactions from the scope of the T+1 requirement, such as the securities financing transactions, SFTs, which include, among others, a) transactions that allow market participants to borrow cash against securities they own, and/or b) transactions in which market participants borrow or lend securities. The exemption, experts argue, was supposed to allow market participants to benefit from the same flexibility: i.e. in terms of determining when an SFT will be settled (regardless of whether they are trading on a trading venue or outside a trading venue (in the so-called over-the-counter market).
Note: source and citation from previously mentioned DG Financial Stability, Financial Services and Capital Markets Union’s Newsletter, nr. 3, July 2025.
Thus, experts confirm that “moving to a T+1 settlement cycle will improve the efficiency and resilience of EU capital markets, reduce “counter-party risk” (i.e. risk that a party in a transaction will default and fail to deliver cash or securities as promised); it will also lower costs for market participants by reducing the need for “margin requirements”, i.e. collateral deposits that guarantee transactions during the settlement process. Besides, the move to T+1 will encourage greater automation of settlement processes, making them in the member states more modern and efficient. Finally, the T+1 cycle will remove the costs caused by differences in settlement cycles with other large markets (that have already moved to T+1), like the US, Canada, India and China. The agreed proposal also provides for the necessary legal certainty that will allow market participants and market infrastructures to work on the cycle’s operational implementation: e.g. a vital step in the right direction occurred this June with the publication of the EU T+1 Industry Committee High-Level Road Map.
More in: https://www.icmagroup.org/News/news-in-brief/the-eu-t-1-industry-committee-finalises-high-level-road-map/. As well in 60 pp map in: https://www.icmagroup.org/assets/High-level-Roadmap-to-T+1-Securities-Settlement-in-the-EU-June-2025.pdf
Thus, in this way the proposal will coordinate all stakeholders’ actions and those of the EU institutions to foster harmonisation and avoid unnecessary misalignment costs, concluded experts.
Our comment
As soon as the main aim of the suggested proposal is to improve the EU-wide “financial market” and increase competitiveness, it is well-worth to show the differences among the big rivals. Thus, in the US financial services, the market consists of two major national financial securities: the New York Stock Exchange, NYSE and Nasdaq (e.g. these two major entities nicknamed “the Big Board”). The two are also forming the largest stock exchange in the world by market capitalization; but that doesn’t prevent others to actively act in the market: presently, there are three leading stock indexes in the US: the Dow Jones Industrial Average, the S&P 500, and the Nasdaq Composite.
Besides the financial sector, which is a core component of the “US capitalism”, the whole economy is guided by stock market approaches: i.e. currently, there are 13 stock market exchanges in the US that are “guiding” the economic development. It is to be noted that the US stock market sector is a “group of stocks” in similar industries: there are eleven different stock market sectors, according to the most commonly used classification system, known as the Global Industry Classification Standard, so-called GICS. These stocks’ sectors make it easier for private investors to compare which stocks are most profitable to invest: i.e. energy and utilities, materials and healthcare, industrial sectors and real estate, etc.
Hence, a vital component of the stock market system is the active use of private capital in the form of investments into different economy sectors: in this way the corporate and public finances/capital can fruitfully cooperate.
As to the EU’s “structure”, only in some most wealthy states – about ten percent of the whole Union – individual yearly income is over $100 thousand; this amount is divided roughly in: 50% for housing and utilities, 30% for discretionary spending and 20% for savings and investment. So, it is quite reasonable to stick to using the 20 percent; it’s just the question of how?
More in: https://www.fool.com/investing/stock-market/market-sectors/
Note: the Draghi Report (see more in https://www.integrin.dk/2024/09/09/eu-wide-competitiveness-challenges-and-perspectives-in-draghi-report/) has shown the major deficiencies in competition between the EU and US financial markets.