T+1 Settlement: time is ticking – why firms should act now

Why T+1 matters

The UK’s transition to a T+1 settlement cycle on 11 October 2027 will mark a fundamental shift in how financial transactions are settled.

Under T+1, certain trades must be settled just 1 business day after execution. The change is designed to improve market efficiency, reduce risk and align the UK with global settlement standards.

While the initiative is market led, we’ll play our part in making sure firms and trading venues are prepared. We’ve engaged with a range of market participants – including buy-side and sell-side firms, financial market infrastructures, and trade associations – to understand how preparations are progressing and where challenges remain.

T+1 will reduce the time you have to process your transactions by around 80%.

Planning early will be crucial. Many of the key deadlines to put recommendations from the Accelerated Settlement Taskforce (AST)[1] into action are in 2026.

What we’re hearing from the market

It’s good to see that market participants are beginning to mobilise. However, we’re also seeing common challenges and a risk of complacency. 

Remember, the later you start making changes, the more it’s going to cost you in the future. Here are 5 key messages we’re sharing with the market:

• Strengthen your inventory management  
  Knowing where your securities are, having them in the right place at the right time, and being able to access them quickly, is essential.
   
• Review your end-to-end settlement arrangements 
  Analyse whether (and where) to improve your end-to-end arrangements for the trading, clearing and settlement of transactions to support T+1. Settlement is a complex web of related transactions. The weakest link will determine success or failure.
   
• Automate where appropriate  
  While we are focused on outcomes, it’s clear that, for most firms, automation will be key to successful transition to T+1. If you rely on extra staff to support manual arrangements, this may not only increase operational costs but also increase the risk of penalties for late settlement. Automation can help improve efficiency and keep costs down.
   
• A successful US transition won’t guarantee success in the UK 
  It’s important to account for the differences between UK implementation and the US, and the complexities of a coordinated UK/Europe/Switzerland move to T+1.
   
• Engage clients and counterparties early 
  Your ability to settle transactions T+1 will depend on your arrangements with clients and counterparties. While confident about their own preparations, many participants are concerned about the readiness of their clients and counterparties. Work together on how you can support each other. (Clients should also reach out to their firms to understand what they need to do.)

Good practice in action  

Some participants have already carried out end-to-end reviews of their trading, clearing and settlement arrangements, including identifying existing manual processes and blockages that could prevent them settling transactions within 1 business day.

Others are prioritising client outreach to identify what changes they and their clients need to make. In order to target clients who may be lagging behind in their preparations, some participants have started to:

• Identify where clients are still using manual processes.
• Monitor clients’ settlement performance.

Well-prepared firms are using detailed T+1 impact assessments to identify necessary changes and secure funding for the year ahead.

As automation is likely to be critical for most firms, it is vital you uncover where manual arrangements are delaying settlement or causing failures, so you can identify changes and secure budget to implement them.

Challenges: what’s holding preparations back? 

Do not rely on US preparations

You’ve warned us about a risk of complacency in the market, thanks to the success of the US move to T+1 in May 2024.

However, the US move benefitted from a long lead time and detailed planning for T+1, as well as centralised post-trade infrastructure.  

Participants cannot simply rely on their preparations for the US move to T+1, as the UK has distinct and separate post-trade arrangements.  

For example, in the US, T+1 was focused on a key deadline for completing affirmations, and responsibility for meeting this deadline was placed on broker-dealers. In contrast, the UK does not have an affirmation process and responsibility for pre-settlement actions is much more dispersed across the settlement chain.  

The complexity of settlement across Europe also increases the challenges. As well as cross-border settlement, there are multiple central securities depositories (CSDs), central counterparties (CCPs) and currencies.  

Clients and counterparties  

Your settlement performance will only be as good as the weakest link in your chain of clients and counterparties.  

While many participants are confident in their own preparations for T+1, they’re concerned about the level of awareness of clients and counterparties – especially those overseas, such as Asia-Pacific clients.  

Work with your counterparties, clients (particularly smaller or overseas), trading venues, CCPs and CSDs to make sure they have suitable arrangements in place to settle their transactions. This will be particularly important for custodians with smaller firm clients on the buy-side.

Securities lending

A key challenge for participants for T+1 settlement will be having to borrow, collateralise and settle securities on the same day.  

Effective inventory management will be crucial. Accurate data for place of settlement (PSET) and place of safekeeping (PSAF) will be key tools. Crucially, you should know where your securities are located when you execute a trade.

Keep an eye out for AST guidance on how to use PSET and PSAF data.

FX transactions

We know market participants are concerned about FX transactions too, whether about T+1 further compressing existing time-zone challenges, or cut-off times for Continuous Linked Settlement (CLS).

For guidance on how to settle FX transactions in a T+1 environment, visit the AST website[1].  

Settlement instructions in CREST

Euroclear UK and International (EUI) offers various options to help you manage and settle matched transactions more efficiently (such as hold and release, and splitting). However, we’re aware that participants use the CREST system in different ways.

Some participants delay inputting – and, therefore, matching – their settlement instructions in CREST until they receive the securities to settle those instructions. This could delay other participants from settling their transactions and disrupt settlement more widely.

Consider how you can use the CREST settlement functionality to:

• Instruct and match settlement instructions as quickly as possible.
• Manage the release and settlement of securities.

What next?

We’ll continue engaging with participants across the market. We expect participants to be able to tell us in detail your plans for T+1 and how you are addressing any existing issues in the settlement process.