Page 5 - peterevans Newsletter Q2 1014

Beware the 6th October 2014

Whilst this may not be the Ides of March for Settlement of

equities traded in the UK and Ireland the fact remains that as from
the 6th October settlement times will be shortened to two days in

preparation for incoming European regulations intended to

harmonise the region’s settlement cycles.

As part of the ongoing regulatory leviathan Brussels wishes to

harmonise European settlement cycles, the period after a trade but

before exchange of assets for cash, to a uniform period of two business
days (T+2).

Moreover by January 2015, analysts predict that the switch to T+2 is
likely to come fully into effect in Europe. However, this does not affect

OTC transactions which will remain exempt. and the relevant

regulation governing this move is still being finalised in Brussels.

According to the EU the aim of the initiative is an important part of the Commission’s agenda to enhance the

safety and soundness of the EU financial system. Together with the Regulation on "OTC derivatives, central
counterparties and trade repositories" (EMIR) that entered into force on 16 August 2012 and the Markets in

Financial Instruments Directive (MiFID) currently under review, it will form a framework by which systemically

important securities infrastructures such as trading venues, central counterparties, trade repositories and central
securities depositories, are subject to common rules on a European level.

Reflecting the UK’s lead in European financial markets the views expressed by the UK contrast with the EU’s

position which is clearly aimed at safety and risk reduction. In the UK commentators generally agree that T+2
presents a further market opportunity and the move is viewed as another step in the creation of a single market

in financial services, something the UK has been striving for since 1993.

From an operational perspective a move to T+2 ought to encourage further growth as a disharmonised cycle is a

barrier to investment.

At time of writing three of Euronext’s markets and four Nordic markets have already announced plans to move to

T+2. Switzerland and Italy are also considering switching to the same cycle on October 6.

The UK’s last major shift in settlement cycles took place more than a decade ago when the market moved from

T+5 to T+3. That said some Euroclear members can already settle trades in real-time if both counterparties to

the trade agree. UK gilts will continue to be settled a day after the trade has been executed (T+1).

The switch has the support of the London Stock Exchange Group and Bats Chi-X Europe, which together account

for the overwhelming majority of trading of FTSE shares. It also has the backing of the Bank of England and the

Financial Conduct Authority.

On the ground

Not quite the Monaco Grand Prix - but great fun.

peterevans go-karting Team Challenge event in
Cardiff, an antidote to working flat out!

Congratulations to our winning teams from the night,
here on the podium, from left: Ian Tabor, Richard

Davies, Adam Wiltshire, Ayman Harris, Aaron Thole,

Joe Lamb and Simon Payne.