The UK’s move to a T+1 settlement cycle could release £1 billion of margin currently required at central counterparties, according to the Bank of England’s (BoE) executive director, financial market infrastructure, Sasha Mills.
Sasha Mills
Speaking at the launch event for the UK’s T+1 transition today, Mills highlights how a shorter settlement cycle will mean that firms and central counterparties face lower counterparty risks, which the BoE anticipate will lead to “significant amounts of margin being released by CCPs to members and their clients”.
Explaining the £1 billion figure, the BoE said the estimate relates to margin posted to support UK cash equities clearing and applies the approximate margin reductions seen in another jurisdiction which has transitioned to T+1 from T+2.
Mills noted the amount was “a significant sum which could be used by market participants for other productive purposes, supporting the UK economy”.
In a speech to an audience at the UK Accelerated Settlement Taskforce event The T+1 Journey Starts Now Mills voiced the BoE’s support for the transition to T+1, noting it should reduce the costs and risks associated with the existing misalignment of settlement cycles and ensure alignment with the US.
“The transition to T+1 should catalyse firms’ investment in automation and standardisation, leading to lower settlement costs in the medium term and more efficient markets,” she added.
The UK will move to T+1 on 11 October 2027, in line with the EU and Switzerland.
James Pike, chief revenue officer at Taskize, commented: “If everything runs smoothly from an operational preparation perspective, the release of £1 billion is a tangible reality. However, the challenge currently lies in ensuring a successful migration by October 2027. Firms must act early to review and adapt their post-trade operations to ensure a seamless transition. This will require huge investment in technology and process reengineering, not to mention close collaboration between industry banks, custodians, and fund managers. The lessons learned from the US shift to T+1 earlier this year highlight the importance of preparation and coordination.”