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Clock is ticking for paper share certificates

On 23 July 2014, the Council announced that it adopted the Regulation on improving securities settlement and regulating central securities depositories (CSDs). This is the most recent step towards the establishment of a single European securities market.

The regulation is expected to be published in the Official Journal in Q3 2014. By 1 January 2015, T+2 settlement cycle should be mandatory and by 1 January 2025, all transferable securities which are admitted to trading on a trading venue (same scope as in MiFID II: regulated market, MTF or OTF) will be represented only in book-entry form. Certain investors in the UK and Ireland are still holding a number of securities in paper form (e.g. paper share certificates), which can take up to 10 days to settle.

The regulation pursues a twofold objective:

  • Harmonise different national rules, which should allow CSDs to provide their services on a cross-border basis
  • Eliminate competitive distortions, since at the moment there is rarely more than one CSD per Member State

The regulation takes into consideration both the international principles from the CPSS-IOSCO on financial market infrastructures and the EU best practices proposals from the TARGET2-Securities (T2S) Harmonisation Steering Group, which are supported by the majority of CSDs in EU.

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