The Investment Association (IA) has concluded that the UK, EU and Switzerland should transition to T+1 settlement on a date in Autumn 2026 after gathering views from its members.
Described as “the average positioning of IA member firms’ views”, the timeline put forward is one of the more aggressive, with most task forces and associations more on board with 2027.
The IA did add however, that should one or more jurisdictions only be able to transition at a later date before the end of 2027, and can commit to this before the end of 2025, the others should move their transition date back to align.
The trade body added In the event the UK opts to move to a T+1 security settlement cycle ahead of Europe, there should be a “safe-harbour” exemption on UK traded and settled exchange traded products – including ETFs, ETNs and ETCs – which should remain on a T+2 secondary market settlement cycle until the EU transitions, at which point the exemption should expire.
Should the EU transition first, a similar “safe harbour” should apply. This should also apply to Eurobonds.
“In the US, the 15 months set out in February 2023 for a May 2024 go-live was sufficient, with settlement rates achieved by the broader market being higher than prior to the transition,” the IA said in its paper.
“Whilst the UK, EU and Swiss market infrastructure may be more complicated, it is our view that many of the lessons learnt, system upgrades and process changes that firms undertook for the US transition can be applied in a UK, EU and Swiss context, making T+1 transition achievable by Autumn 2026, 24 months from now.”
The UK has all-but committed to 2027 now, with Europe’s top markets watchdog subsequently signalling its intentions for moving EU markets to a T+1 settlement cycle through a statement outlining both the urgency of acting and the preference for aligning with the UK and Switzerland.
“In a period when jurisdictions are aiming to demonstrate and boost the competitiveness of their capital markets, the ecosystem’s ability to enact a fast but orderly transition to T+1 settlement is crucial,” the IA concluded.
The paper outlines a range of considerations across the UK, EU and Switzerland. One other point was that there should be a recommendation, but not a regulatory requirement, to transition the mutual fund subscription and redemption settlement cycle to T+2 from the common T+3/4 in the UK and other popular EEA fund jurisdictions to coincide with the UK, EU and Swiss transition to T+1 in capital markets.