Introduction – What is T+1 and what are its advantages?

In May 2024, the US, Canada, and Mexico moved from a T+2 to a T+1 securities settlement cycle. Shortly after, the EU, UK, and Swiss financial markets announced plans to do the same, with a move planned for 11 October 11 2027.

Under a T+1 settlement cycle, securities transactions are finalized one business day after the trade date (T+1), compared to today’s T+2 standard. This shift leaves firms significantly less time to complete all post-trade and settlement activities. In some cases, although the overall settlement period is cut by 50%, the actual working window can shrink from about 24 hours to just 2-4 hours, a reduction of up to 90%. While meeting this accelerated schedule poses operational challenges, T+1 offers notable advantages for investors, including reduced default risks, faster access to funds that improves liquidity, and lower margin requirements due to the diminished counterparty risk.

This article offers a high-level overview of the impacts of T+1, outlines the transition process for the European market from a transformative standpoint, and highlights key lessons from the US experience. Future publications will dive deeper into specific areas of impact across the securities value chain, along with potential mitigation strategies. The implications extend well beyond IT and operations, T+1 represents a profound transformation for the business as a whole.

The impacts of a shorter settlement cycle 

With the significant reduction in time available to complete post-trade and settlement activities, T+1 will be disruptive for European firms involved in trading and administrating securities.
Operations will need to be redesigned to meet more demanding deadlines. Our analysis suggests that at least 20% of post-trade and settlement activities will be fundamentally overhauled by the move to T+1, triggering changes across entire business models.
Companies can expect the need to improve their IT infrastructures (to allow for faster and more automated processing or client orders) as well as assess workforce needs to guarantee timely processing, which can translate into additional implementation and run costs.

Processes from client interactions through back-office operations will need to be streamlined to support the required IT enhancements and minimize exceptions that require manual handling, which could endanger the firms ability to comply with the tight deadlines. This streamlining will especially critical in already challenging scenarios around foreign exchange (FX) and the handling of exchange-traded funds (ETFs), where additional layers of processing can strain the shortened settlement window.

Finally, firms will need to ensure that staff are fully trained and equipped with the skills to operate new systems and procedures, while also maintaining effective coordination across jurisdictions, particularly for larger operations.

The transition to T+1: undertaking the transformational journey

To help firms realize the potential benefits of T+1 while addressing these challenges in time for a smooth transition, regulators and industry bodies have begun laying the groundwork.

In November 2024, ESMA published its assessment of shortening the settlement cycle in the European Union[1], recommending migration to T+1 by Q4 2027. This nearly three-year lead time reflects the regulator’s emphasis on thorough preparation. In fact, ESMA proposed timeline calls for firms to assess impacts and allocate budgets in 2025, implementing necessary changes in 2026, and begin market-wide testing at the start of 2027.

Figure 1 – ESMA’s proposed T+1 implementation timeline (November 2024)

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Following ESMA’s report, two other important publications have been made. First, the UK’s Accelerated Settlement Taskforce (AST) published its UK Implementation Plan in February 2025[1], identifying twelve critical actions to guide market participants, to ensure a sustainable transition to T+1. This publication is mostly principles-based. More recently, and with a more detailed and technical approach, the EU T+1 Industry Committee released its High-Level Roadmap in June 2025[2]. This roadmap includes 30 recommendations and 57 sub-recommendations spanning the securities value chain and dedicated activities.

Figure 2 – Areas of recommendation covered by the High-Level Roadmap (June 2025) 

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A central theme throughout the roadmap is the push to enhance automation across the entire value chain, reducing manual intervention and enabling straight-through processing (STP). Achieving this will require market players to improve their static data quality and align with counterparties on commonly accepted timetables and deadlines. The wide range of recommendations and their prevalence across the entire securities value chain, underscores how impactful and transformative T+1 will be, compelling firms to implement changes that go beyond IT upgrades or process modifications. Notably:

• Harmonize timing for key trade lifecycle events—including trading cut-offs, allocation and confirmation deadlines, recall notifications and settlements—requiring companies to adjust their processes and coordinate with their counterparties to achieve global procedural alignment.
• Enhance coordination between trading stakeholders, updating trading rulebooks to meet the new T+1 requirements while ensuring reconciliation across entities’ trading books.
• Automate trade matching and discrepancy detection to prevent settlement delays.
• Accelerate the delivery of critical post-trade files—including the end-of-day file, the netting report, and the settlement instructions—to give clearing members earlier access.
• Shift to real-time settlement instructions processing, extending the window to resolve exceptions and errors but necessitating a significant overhaul of existing batch-based systems and procedures.

The roadmap also addresses complex areas such as the processing of corporate actions, handling of FX, processing of securities financing transactions (SFTs), and asset management, all of which add trading steps or increase interactions between market participants, complicating settlement. For these scenarios, the recommendations include better planning and forecasting (FX), greater automation in corporate actions processing, and the use of partial settlement for SFTs. 

Lessons learned from the successful US transition

The European and US markets differ significantly, making  the T+1 transition more complex in Europe. Notably, the US comprises a single currency, one principal time zone (EST), and a single settlement venue (DTCC). Comparatively, Europe comprises several currencies (e.g., euro, Swiss franc, pound sterling), four major time zones, 39 central securities depositories (CSDs) across 35 countries, and central counterparties (CCPs) operating on different timetables.

On top of the added complexity, while EU[1] settlement failure rates being low, the region is behind the US in the STP rates, highlighting the need for significant automation improvements ahead of the October 2027 deadline.

Nonetheless, some of the lessons learned from the US success can be applied to the European context and can inform regulators and market participants in their transformation journeys. Notably:

• STP rates of close to 100% and the avoidance of batch processing will be needed to ensure settlement failure rates do not increase after the rollout of T+1.
• The preparation should start early (>1 year in the US under significantly simpler conditions as highlighted above).
• Emphasis should be put on testing, as DTCC and EFAMA pushed from a month-long testing period in the US which gave participants the chance to test their setups and adjust before the move to T+1. This is well in line with ESMA’s proposed testing phase between January and October 2027, which will in turn require that market participants implement the necessary changes by the end of 2026.

U.S. firms that did not adequately prepare for T+1 experienced higher workforce costs to manage exceptions and coverage outside regular hours, costs that can account for up to two-thirds of the total transition expenses.

Conclusion

The shift from T+2 to T+1 in the EU, the UK, and Switzerland offers several benefits to investors, particularly in mitigating counterparty risk and improve liquidity management. However, it will also pose challenges across the securities value chain, which are operationally more complex than those felt in the US due to the specificities of the European market.

To address these challenges and ensure market participants are ready to comply with the accelerated settlement cycle from day one, regulators and industry groups have issued recommendations focusing on:

• Ensuring the automation of post-trade and settlement activities, including the improvement of existing IT systems and underlying data quality.
• Strengthening trade matching and confirmation processes to meet updated regulatory and market infrastructure deadlines, including reviewing operations and timings in coordination with counterparties and partners.
• Revising existing operational set-ups around complex areas such as FX, handling of SFTs, processing of Corporate Actions, and Asset Management to avoid disruptions.

Although T+1 will not go live in Europe for more than two years, the associated challenges and necessary changes demand a paradigm shift and close cooperation among market participants. As per ESMA’s proposed timeline, firms should begin their analyses immediately and secure budgets for implementation in 2026, in preparation for market-wide testing in 2027.