The REGIS-TR RoundUp
The REGIS-TR RoundUp is a hub for regulatory reporting news and views from your leading Trade Repository team and industry guests from across the globe.
The REGIS-TR RoundUp
S11:E2 Special T+1 Planning Show "Don't Panic But Start Building Now"
This month, we have T+1 expert Jesús Sánchez with the latest updates and advice for market participants to prepare for the January 2027 testing deadline. Jesús is Iberclear's Head of Domestic Settlement, a member and chair of various ECSDA committees and CSD industry working groups focused on settlement discipline and T+1. Along with regular hosts Laura Rodríguez and Andrew Keith Walker, this episode is a masterclass on getting ready for T+1. It's possibly an even bigger challenge than EMIR Refit... are you ready?
Thank you made to the accuracy or completeness of information in this podcast, and nor should it be taken as any legal, tax or other professional advice, but take it as 35 minutes of expert insight and industry leader comment as we go behind the scenes and under the hood of the world of regtech, regulatory reporting and trade repositories. Welcome to the Registry R Roundup. Welcome back to this season 11 of the Registry RR Roundup. Yes, we are going strong. Episode 140. Yes, 140 episodes. And we have got an absolute doozy for you today, because everyone's talking about T plus one. But do you really know what that is going to mean for your business? Now, fortunately, today we can answer that question because we have a bona fide T plus one expert here with us.
Andrew Keith Walker:He's on the EU T plus one industry committee. He is also the was the chair of market settlement efficiency committee for T2S. He's the chair of the settlement working group for Exeter. He joined BME in 2006. He's been 19 years there. Before that, of course, he had 10 years at Citibank, where he headed up equities and fixed income in the custody team. There he is head of domestic settlement services for Iberclear, the Spanish CSD. It's none other than, of course, Jesus Sanchez. Jesus, welcome.
Jesús Sánchez:Welcome. Thank you very much for these magnificent words, but, honestly speaking, it seems that I'm very old.
Andrew Keith Walker:well, you don't look old. I think that's the important thing, jesus. I mean, you know, compared to, uh, my regular co-host, mr john kern, mr nick bruce, uh, hi, fellas, if you're listening, trust me, you look positively youthful. Okay, and talking of youthful, uh, that leads us on to our second guest back in the virtual studio. After traveling the corridors of power all over the EU 27 and beyond, it is, of course, the pride of Spain herself and the head of our institutional relations team. It's Laura Rodriguez.
Laura Rodriguez:Thank you very much, Andrew. How are you?
Andrew Keith Walker:I'm good. I'm good and I'm going to say how are you? I'm going to say how are you? Because you've just come off a call just yesterday about changes to streamlining regulatory regimes across Europe. I know you can't say too much, but this is huge news, especially for a show that's focused solely on regulatory reporting in Europe. This is probably the best news I could have as a journalist in the space. I mean, what about yourself? Was it good news?
Laura Rodriguez:for you? Yeah, most probably. I mean, we were all eager to receive something like this and to keep working on the changes that will come. So, yeah, let's discuss about this, about T plus one with Jesus and everything that will come. So, yeah, let's go deeper into this everything that will come.
Andrew Keith Walker:So, uh, yeah, let's go deeper into this, okay. So, jesus, as we've told everybody, we're jumping in with to the deep end with a t plus one special. Okay, um, and this is a a really big year, isn't it? For market infrastructure in the eu, because now we got the ecms system. Uh is live, uh, the um euro system, collateral management system too many systems in that acronym.
Andrew Keith Walker:I'm going to say as I'm, if you're listening. Um, uh, of course we've got tips, t2, t2s. We've seen a massive boom in tokenization, digital issuance. It just feels like everything is going plumbing wise right now and going mad to make t plus one. When it comes into effect in October 2027, it's going to make T plus one nice and easy, with no problems. Okay, now I've set that up. I need you to knock it down. So tell us, set the big picture. How big is this challenge for CSDs, for NCBs, market participants and as well you know how are they going to adapt to this? As well as the full suite of MIFIR, csdr, a mere 3.0, as we're calling it now. Well, past refit the rest of it. This is a huge year of change for market infrastructures. Tell us what's the big picture.
Jesús Sánchez:Yes indeed, yes indeed. The question is that we have to go a little bit in the past, because we have been a lot of changes that at the end came from the consolidation of T2 and T2S the major one of them is the payment system and the other the security settlement platform and afterwards ECMS came into the court also, and it was just a few weeks ago, in April. So it's fantastic. And now we have everybody sorry, ecms in June. It's fantastic that we have now everybody playing in the same room.
Jesús Sánchez:Obviously, huge effort in many areas cost, human resources, management of portfolio, because at the end we have to continue our life, because these FMI's and other stakeholders have to live with it. At the same time, in parallel, because we have customers, we have different things that we have to take on board and now, without any break, to breathe T plus one, as we have now in the OE zone. So we have been working at MUNS from November, with the publication of ESMA report, when it was clear that the mandate to implement T plus one in October 2027 is a critical path, and now, in a little bit more than six months, we have published the final report from the industry committee with the recommendations that everybody has to take on board in order to be ready for that time, because what is clear is that this date, october 20, 2007, is written in stone as far as we receive from the regulators, so we cannot do any long break. Just a couple of minutes to breathe after this EMS implementation and now ready to go again.
Andrew Keith Walker:Okay, and just something you touched on there now. You worked in custody for 10 years. You were involved in fixed income and uh securities. You know repos booming, there's more clearing going on, there's more tri-party collateral management. The securities uh industry is doing well, the repo industry is doing well and they are busy. So you know something about what it's like to be running a busy department and to then have to really focus on your settlement discipline. And that was back in the days when T2S was coming in. This really is going to be a major disruption for market participants, isn't it?
Jesús Sánchez:Yes, indeed, the question is that many things have been discussed about how Americans have implemented T plus one, but we do not have to forget what you have mentioned. Here in the EU, we have a lot of stuff coming into the plate and with the penalties redeemed, which means that if you have failed, you have to pay for that, and in the States, no. So it's important, it's very relevant, because the participants are quite or have concerns about how this would impact in their implementation, because we do not have any kind of second life, because we have to do it well from the very, very beginning and, as you mentioned, a lot of new stuff, new traits, new products coming in, because, as I mentioned before, life is not a stop until we implement T plus one.
Andrew Keith Walker:Life runs and we have to do it at the same time and I want to bring Laura in here While we're doing the big picture part of the story, there is an even bigger backdrop, isn't there? To the T plus one story. It's like a story within a story. It's like a sort of nest of Matryoshka dolls here, because what we're really talking about, t plus one, is one of those many stages that we need to go through to facilitate the Savings and Investments Union plan for the EU.
Andrew Keith Walker:The Savings and Investments Union plan for the EU, now I should explain it was the Capital Markets Union for the previous two European commissions and they never quite managed to move that plan forwards. It's now the Savings and Investments Union. It was the subject of Ursula von der Leyen at Davos this year and it is all about lowering the cost of capital in the EU so that companies, when they float, they don't always think I'm going to IPO in America, because the cost of capital is lower and there's one big domestic market and that's where all the other cool kids do it. We want the cool kids to IPO in Europe. So tell us a bit more about that. We've got Tplusone. We've just had the ECMS. Go live the Eurosystem Collateral Management System. How are plans evolving around the SIU? You've been involved, haven't you, in consultations and papers and all kinds of things, so give us the big picture update.
Laura Rodriguez:Yeah, absolutely, andrew, and thanks for the question. I think you are spot on. As you say, T plus one, ecms and all the ongoing work on post-trade harmonization are part of a much broader agenda. So we are not just talking about shortening settlement cycles or modernizing central bank systems. These are all pieces of a puzzle in the EU's long-running ambition to create a deeper and a more competitive capital market. As you said, it all started under the Capital Market Union and now it's rebranded as the Saving and Investment Unions. We can see what other names we will receive in the future.
Laura Rodriguez:But, joke aside, it is clear in this consultation that there are at least three key pillars behind all this. So the first there is a need for more harmonization across the euro system in general. Right now, several post-trade processes are different between national central banks, as we have just discussed, and that creates fragmentation and inefficiencies, especially for cross-border activities and projects like ECMS and the broader target services consolidation aims to fix this aspect and to create one solid and interoperable market infrastructure that is truly European. So that will be one of the big points of this agenda. The second we need to better improve fiscal and regulatory alignment. The consultation shows a strong feedback around tax barriers and diverging national rules. This is like the elephant in the room. These things make it harder and more expensive to operate across borders, so tackling them is essentially if we want to unlock the EU-wide investment on a scale that's especially key for small and medium entities and retail investors, but also for us for the market infrastructure, as many of them have direct supervision at a national level and, in my opinion, moving towards a centralized supervision is a huge challenge. This industry, as we all know, is overregulated and this change will imply even more cost and a big burden at first, but it seems that this is what the European Commission and the European authorities consider key towards future harmonization and simplification.
Laura Rodriguez:And third, this is all about global competitiveness. And third, this is all about global competitiveness. Europe wants to position itself as a serious alternative to the EU's capital market, and we need to do so. We need to be there, but to do that we need efficiency and simplicity on the regulations that we currently have, and that's why issues like post-trade efficiency have, and that's why issues like post-trade efficiency, the adoption of GLT and a smarter reporting framework are gaining traction in this consultation. So, yeah, I think overall, this is the big picture of the Sabine and Investment Union. Several respondents to the European Commission consultation have a clear common message, which is simplify the rules, reduce duplication and streamline the supervision, and there is also a strong support for strengthening SM smash role. But most other respondents also prefer a coordination over a full centralization. So let's see what's the final decision of the commission.
Andrew Keith Walker:OK, so we know that the Savings and Investments Union, or the Capital Markets Union as it was called, was on the agenda for about two EU commissions and never got off the ground completely. Now the wheels really are turning, and of course that means T plus one. If we're going to reduce the cost of raising capital, increase the velocity of capital moving around the euro system, then we've got to settle in the same way that the americans do. I mean, tell us this is a massive job. Does the regulator know it's going to mean christmas in the office for the next couple of years?
Laura Rodriguez:I hope no, but uh, no, really, I think it's very clear with this topic, with t plus one, they really want to commit with this agenda and jesus is the more most convenient person here to discuss the reality of this and I'm sure he will give us more insight on the broader response he has been involved in in this.
Laura Rodriguez:Um, but, um, yeah, in general, the topic is what is now on the table. As I said, we need to follow the agenda and most probably this is already a reality, knowing all the challenges that we already have, and ESMA is continuing with this path of simplification, efficiency, etc. For example, I just want to comment very quickly they have recently launched a call for evidence on simplification of financial transaction reporting across EMIR, mifir and SFTR, and this is kind of a practical step after the commission consultation and at the end, this is all related. That I said at the beginning, this is a picture I mean little pieces of a big puzzle that is this moving towards this competitiveness. So, yeah, let's discuss also about this call for evidence in next episodes, because there will be a lot of things to tackle here.
Andrew Keith Walker:Hey Zeus, I want you to take us through the settlement discipline sort of aspects of this, because this really does speak to a major shift in the way the instructions get sent and you know trades are settled. I mean, iberclear, of course, is at the heart of this in some respects. Like all CSDs, you've had to collect the first penalties under CSDR for fails and you're also an expert on settlement timings. And when we talk about T plus two we think, oh, that's T plus two days, but actually it's not, is it? It can be less than that because of the life cycle of a trade and settlement. And in T plus one it sounds like T plus one day but it's not. That is it. It could actually be quite a lot less, same as T2S can be, you know, or T plus two can be.
Andrew Keith Walker:Ok, jesus, let's talk a little bit about the settlement discipline side of this, because you're at Iberclear. Iberclear has collected some of the first fails penalties under CSDR and CSDs now are responsible for enforcing better discipline. And there's a bit of complexity with T plus one, isn't there? Because when people think of T plus two they think it's T plus two days, but actually it can be less than that and in the same way way, when we talk about t plus one, it sounds like t plus one day, but it could be less than that now. Now, less than one day doesn't seem like very much. So, if you're listening about, how do I need to change my systems? The answer is going to be well, you need to be able to settle a trade in less than a day. Give us some idea of how complex that actually could be.
Jesús Sánchez:Yes, it's a very good question because, honestly, the main impact is on timings, and different timings and we have to start from the very beginning is what you have said Today. From the moment that someone does a trade, they have at least almost two days in order to send instructions to be settled. But in the coming T plus one. Or when I say two days in order to send instructions to be settled, but in the coming T plus one, when I say two days, it's one full day and the rest of the day from the moment of the trade has been done to the end of that day. But in the coming situation T plus one, once you do the trade, you have to send instruction before eight o'clock, the same trade date, the same date. So usually the trading venues close, most of them at 6 o'clock pm, so you have only two hours. We will have only two hours to do many things because at the end, trading is one layer but cleaning is one additional layer and it's very important in terms of risk, in terms of even reduction of cost, because they need a lot of instructions. So all of this process has to be run quickly, they have to be very efficient, they have to be very automated, because obviously manual here will be a death. So definitely many things has to be fine-tuned to the extreme. Colloquially speaking we can say that. So everybody has to be ready to lose and to be very fit, fine-tuned, automated and ready to be absolutely quick in order to be effective.
Jesús Sánchez:An additional question ESMA, when they mandate in November last year that we have to implement T plus one, they didn't say that, only they say in the same statement, so it's the same mandate In the same statement. So it's the same mandate is market has to implement T plus one in October 2027, maintaining the settlement efficiency rates that they have before the October 2027. So that means that there will not be excuses for being less efficient. You have to be even more or at the minimum maintain those rates. Of course, for a very, very short and interim period of time, esma could accept and they have mentioned informally that for a very short time they could have said OK, there will be some implementation or adaptation timing, but very short, even not for Christmas. If we implement in October, for Christmas we have to be very, very efficient back to the previous rates or even better.
Andrew Keith Walker:You are an expert, obviously, on settlement discipline. You're at the heart of that whole CSD community. You're also on a number of industry working groups, steering committees. I interviewed Mark Jem from Exxon a while back and he was saying that the plumbing side of things is great. There's a lot of other issues that market participants and regulatory authorities have to solve to sort of get out of their own way, to make this a smooth implementation. Now, on that front, we've done shows about SFTR, we've done shows about EMEA refit, we've done shows about MIFIA, and not just that, obviously, but CSDR and all the various different regimes that have happened to us over the last five years. It seems a lot, and the number one question is timelines testing being ready? So tell us timelines. What should market participants be doing right now?
Jesús Sánchez:No, it's a very good question because although we see that we have a long time in front of us, it's very short. It's going to be very short, so we have to be ready from now, and in BME and also in CXS in Switzerland, we have been taking this very seriously because in both countries we are leading the national task force responsible for the coordination of the implementation of T plus one. It's very important that we consider this not as an individual responsibility of every institution, but a community one, because at the end, if the community is not ready, if only one or two institutions are ready, at the end as community we will fail Definitely. We have to do it together. So we are quite involved in supporting all our stakeholders on their internal assessments.
Jesús Sánchez:Now is the moment for internal assessments because we have now the papers from the industry committee, the final report. We have also many works done already in the different national communities. I can tell you that in Spain we have had already three task force that now we are closing them because we have finalized our internal work. And now is the moment for just digging in more detail about the internal assessment that every institution has to do in order to check what they have to implement internally and not only thinking in their queue and isolated system, but also with their customers, because at the end, the custody chain could be long and everybody has to be ready. We have only almost 18 months to be testing, because now we are in the middle of 2025 and by beginning 2027, we have to be doing the testing. So we are focusing on those areas that they have to be the participant has to take seriously and assess in detail, and especially that they realize if they have potentially areas that T plus one could impact them negatively in a later phase.
Jesús Sánchez:Even so, because it's the moment now to be sure that when we start a technical, functional and operational implementation, we will not find any hidden showstopper, now is the moment to be sure that at least we can list the issues and we can face them one by one. Key question, in case that participants and the relationship with other participants find something, is the moment that they immediately raise the hand and we have to discuss. We have to take it as community and work together and, for sure, january 2027 is a very clear deadline. We cannot lose the train because T plus one has to be tested. As easy to understand as community, you cannot test in isolated ways. So in case that someone loses the momentum, they will have a lot of problems. So it's the moment to be sure that nobody loses this.
Andrew Keith Walker:And I mean on that front, what about perennially, whenever we talked about new regimes coming in, someone raises the issue of timestamps, about doing trades with markets in different time zones. So if you're trading with an Asian bloc, trading with US Mexico calendar, you're trading across to the Middle East and Near East, the Middle East and the Near East, then you have changes, obviously in time zones that always create timestamp issues or identifier issues or various sort of technical nitty-gritty that people always assume is just going to get solved at the last minute. What do you think about that? I mean, presumably, on the working groups, you're already talking about ways to deal with time zone issues and positions and that sort of stuff.
Jesús Sánchez:Yeah, this is one of the critical points, because now you don't have one day in between to do this. Everything fixing, everything gets fixed of the different institutions how they handle, is the human resources, because in some specific elements, probably when the institutions work in different markets with a very different time zone, for sure they have to think about tools like artificial intelligence and other tools in order to anticipate as much as possible to the potential bottlenecks. But it's fair to say that it will depend also about the structure of those institutions, because if they have different branches in different time zones, probably they can manage in different way than the others that they have concentrated in one country or in one place. So it's something that for sure cannot be lost in the discussions. It's a very important element that has to be addressed.
Andrew Keith Walker:But it's good news, isn't it at Iberclé, because your whizzy high-tech new state-of-the-art system went live in I think was it March, april, it was earlier in the year. Anyway, it's been live for a while. It is a state-of-the-art settlement system which is absolutely geared up for T plus one. Tell us a bit more about that. Let's hear about the good news at Iberclé.
Jesús Sánchez:No, in fact, exactly. It's a very important project in our life because it was a regulatory one with very tough deadlines and, unfortunately, sometimes we have to reprogram this project due to delays in ECMS especially. So, finally, we did it this year in March, and quite successfully, because I can tell you that the transition was very smooth, even better than expected, and last week we were checking the evolution of the volumes, the evolution of the efficiency, and I can tell you that you can believe on me or not, but I can tell you that all of them are positively moved. So definitely we have very good news about the implementation of reform. So we can feel quite proud of that, not as BME, but also as CyberClear, but also as a Spanish community, because at the end, this is engagement of everybody and we can tell you and we can say that it definitely has been in success, a story of success okay, good, good.
Andrew Keith Walker:so it's good that we uh, uh, coming to, uh, the end of the show here on a high note. Uh, if you're sitting there worried about what t plus one is going to mean, you know what I think this time I think, with all the experience people have had, that you're going to be ready in time. Don Don't worry, just relax. But of course, that is me making a prediction, and you know we love our crystal ball questions here on the show. Obviously, jesus, as our first guest, you may not have done the famous Registriar crystal ball before. So, lara, you're an old hand, you can show us how it's done. What are your T plus one predictions? We're running through Testing. Starts is meant to start January 2027. Implementation October 2027, as we've discussed in the show. How do you say Christmas in the office in Spanish?
Laura Rodriguez:We should invent a specific word for that. That's right. That's a difficult prediction. For sure, I think the involvement of central banks is going to be key. They need to get all the leadership on this to ensure that this is done properly. It's an under-benefit and I think they will be the major ones involved in the final testing and in the clarifications at the end of all the small things that could be pending, but definitely it will follow the agenda that is there, so I think we're going to make it. I think it's time Now. The discussions are there, but the readiness is going to come by the deadline, I'm sure.
Andrew Keith Walker:Okay. So, jesus, it's crystal ball time and this is your first crystal ball question, so you know I'll make it a gentle one, which is, given your experience working in the industry, being an expert on settlement discipline, being right at the cutting edge of new regulations coming in the implementation of new tech, you are probably the best person to answer this. And, of course, you are head of settlement committee at Exeter as well, and you're on the T plus one committee. What are your predictions at this early stage of the T plus one implementation? Will ESMA get it right in their response to the industry survey the consultation paper, that's this you know, obviously, that they're looking at right now and will market participants be ready in time for january 27 to start their testing?
Jesús Sánchez:I really appreciate this moment because everybody loves to have a kind of crystal ball moment without any responsibility of what you are saying. So fantastic to be to take this and today, of course uh, of course it's of a disclosure about my conclusion. Let's see what happens, but what I can feel now is that it will depend how important or what level of importance the different institutions give to this, and I hope that they have been taken very seriously to this, and I hope that they have been taken very seriously. At this stage, at this moment, I can tell you that my feeling is that everybody is taken very seriously. So this is a good sign-off, or a good prerequisite, if you want to say it this way.
Jesús Sánchez:But in any case, I foresee a lot of work to be done. I foresee a lot of work to be done. Hopefully we cannot leave for the end of the time, so allowing us to have a more not relaxed, but more order implementation project. But in any case, for me it's a challenge, clearly a challenge, and potentially some institutions could suffer a little bit because it's a cost. It's a challenge also for management and for sure, depending on the clients, it could be the same institutions the certain beneficency could be impacted in higher level than others. Those have to be starting the discussions with the clients soonest, as soon as possible I tend to be very aggressive and saying that they have to do even now, before the holiday season, so it's a moment of work and contact the clients in order to anticipate the potential showstopper, the potential risks, and to be ready for that and to be ready for that In any case, as you request me.
Jesús Sánchez:Just to give you a kind of anticipation, although it's a finger in the air. I think that, as average in Spain, we will not have special issues, but potentially some institutions could be a bit less optimistic. But let's do it. Let's do it together and, as I mentioned before, iberclia is trying to coordinate the national task force in order to support every institution and be ready as a group. So let's do it that way, hopefully.
Andrew Keith Walker:Okay, that is great. Thank you, you heard it here first on the show. It's the summer of T plus one. Everybody no-transcript and hopefully the motivational speech that our listeners are going to need to get moving on this. So all that remains is for us to give a huge virtual studio. Thank you to the head of domestic settlement services at Iberclear, also the chair of the settlementettlement Working Group at Exeter and on the T Plus One Industry Committee as well, none other than Jesus Sanchez. Jesus, thank you very much. Thank you very much to you.
Jesús Sánchez:I'm open to be here or to discuss later. Thank you.
Andrew Keith Walker:Fantastic and as well, obviously, a huge thank you to the pride of Spain herself, the head of institutional relations, who is the one who has to translate all of this between the regulatory authorities in their lofty marble halls and the hardworking financial institutions in the air conditioned offices around the world. The pride of Spain, laura Rodriguez. Laura, thank you very much.
Laura Rodriguez:Thank you, andrew, thank you to all the listeners and especially thank you to Jesus. This was a great discussion, a lot of insights on T plus one, yeah, and thanks a lot. Have a great summer if we don't speak before.
Andrew Keith Walker:So I'm afraid that's all we've got time for. We have to go. It's a huge thank you to everyone for making this happen Our friends at Iberclear, everyone at BME and, of course, at the Six Group, and a huge thank you from me, andrew Keith Walker and our producer, manuel Moreno-Garcia. We will see you on the next show and don't forget to join us on our LinkedIn page that is linkedin slash company, slash Regis, hyphen TR, where you can network with Jesus and everyone who's been a guest on the show so far, and you can even connect with myself. But if you want to come on the show, connect with Manuel Manuel Moreno-Garcero, our producer, would be delighted to talk to you about that. And in the meantime, from everybody here, have a good month, have a safe month. We'll see you soon. Bye-bye.