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Financial markets across the world are undergoing a major transformation with the move to T+1 Settlement – a shift that compresses the time between trade and execution settlement from two business days to one. Having already been implemented in some countries – including the US and Canada – it represents a strategic evolution that will impact every participant in the trade lifecycle.
The EU, UK, and Switzerlandare next to implement the new framework, and here we explore what T+1 Settlement is, why it’s important, and how to best prepare for what’s to come.
What is T+1 Settlement?
T+1 settlement requires the settlement of securities bought or sold to be delivered and paid for within one business day of the transaction date. For example, if a trade is executed on Monday, settlement must occur by Tuesday. This update replaces the previous T+2 framework.
This change accelerates the entire post-trade process, requiring firms to complete trade affirmation, allocation, and settlement in half the time. The implications of this are significant:
- Manual processes become unsustainable.
- Operational teams must work faster and smarter, often across time zones.
- Data quality and real-time processing become critical to avoid settlement fails.
- Pre-settlement activities like funding and FX must be front-loaded.
Why was the T+1 Settlement introduced?
Implemented by the Financial Conduct Authority (FCA), the move to T+1 was designed to make markets safer, faster, and more efficient. Key objectives from the shortened settlement time include:
- Improve market efficiency by lowering counterparty risk and freeing up capital sooner for reinvestment.
- Reduce counterparty, market, and credit risk by shortening the number of days between trade execution and settlement especially during periods of high market volatility.
- Provide investors with quicker access to funds or securities.
- Align global settlement standards to simplify settlements across global jurisdictions and cross-border trading via a seamless process.
When will T+1 be implemented?
T+1 Settlement has already been implemented across the US, Canada, and Mexico since March 28, 2024, and is set to come into force across the EU, UK, and Switzerland by the deadline of October 11, 2027.
While that may seem distant, the complexity of the transition – especially in Europe’s decentralised market – means preparation must start now.
Who is affected?
T+1 impacts the entire trade lifecycle, touching every participant – from asset managers, brokers and dealers, to exchange and clearing houses, fund managers and investors.
Buy- and sell-side firms must re-engineer their post-trade operations to meet compressed timelines, while custodians and central securities depositories (CSDs) face the challenge of coordinating across multiple jurisdictions and time zones.
Asset managers and investors will need to adapt to earlier funding and foreign exchange deadlines, ensuring liquidity is available sooner.
Retail customers stand to benefit from faster access to settled funds and reduced risk exposure.
What is the impact of not being T+1-ready?
Firms that are not T+1-ready face significant risks and consequences:
- Increased settlement fails can lead to financial penalties and reputational damage.
- Operational bottlenecks may strain teams and systems under compressed timelines.
In a global market where T+1 is becoming the standard, lagging firms risk losing competitiveness and attracting regulatory scrutiny for non-compliance or poor risk management.
Lessons from North America
The experience in North America provides a clear roadmap for firms in the UK and EU preparing for T+1. When the U.S., Canada, and Mexico transitioned in March 2024, those firms that invested early in automation and process redesign gained a significant advantage. They managed compressed timelines without major disruption, reduced settlement fails, and improved operational efficiency.
Conversely, firms that delayed preparation faced staffing challenges, extended operational hours, and bottlenecks caused by manual processes and legacy systems. The key takeaway? Automation and readiness are non-negotiable for a successful transition.
Why T+1 matters: The implications for EU markets
For the UK and EU, the path to T+1 Settlement is even more complex. Unlike the relatively centralised U.S. market, Europe’s post-trade landscape is fragmented across multiple currencies, diverse market practices, and a wide network of central securities depositories (CSDs). This complexity makes coordination more difficult - but also more critical.
To succeed, firms must invest in automation, drive behavioural change across front and back offices, and collaborate across the ecosystem. Custodians, brokers, asset managers, and regulators will need to align on timelines and standards to ensure a smooth transition.
Are you T+1 ready?
T+1 is not just a regulatory requirement – it’s a strategic opportunity to modernise operations, reduce risk, and enhance market efficiency. The deadline of October 2027 for UK and EU implementation may seem distant, but preparation must start now. Firms that act early will be best positioned to thrive in a faster, more interconnected global market.
Get in touch with our team to see how Xceptor can help you transition.
