The UK Accelerated Settlement Task Force Technical Group (TGT) has published a consultation paper with guidance to support the UK transition to a T+1 settlement cycle by end of 2027. The report makes 57 draft recommendations for industry participants and regulatory bodies which are essential for a smooth and timely transition.
Whilst there are two alternative scenarios for the UK T+1 transition – a coordinated transition with the EU and Switzerland or an independent UK transition – the recommendations are tailored to a UK only transition.
This document provides a perspective on the TGT report, and is relevant for Executives (CFOs, COOs, CROs, Chief Control Officers etc); Heads of Planning, Transformation, Strategy and Compliance; Board Members of all firms subject to T+2 settlement under current UK CSDR rules.
The TGT report contains recommendations which cover critical post-trade activities that firms must be able to implement effectively for a successful UK transition. We have outlined key topics relevant to the UK transition in the table below and pulled in some observations from the US transition in May 2024. While market structures differ, UK (and EU / CH), in hopefully short order) industry participants must be prepared to leverage the US experience to successfully implement T+1.
The US experience has shown that the T+1 transformation programme is large and complex. Firms should begin preparing for the transition by taking some essential steps:
1) Establish a governance structure to oversee T+1 transition, including senior business and functions representatives, and obtain headcount commitment from management to plan and deliver.
2) Conduct analysis to identify challenges in the existing settlement cycle and changes required for T+1 implementation.
3) Kick off impact assessments of the teams, processes, and systems affected and the magnitude of change. This should also consider potential interdependencies and overlaps with other programmes (both from a strategic design / change and a resourcing perspective).
4) Develop a roadmap for implementing T+1 requirements given that sufficient detail of required changes is now available. The roadmap can be finetuned when the final TGT report is published in December 2024.
5) Develop budgets and allocate funding and resources. Securing budget to begin scoping and implementing necessary process and infrastructure changes is crucial to enable a successful transition.
A successful transition will not only require resolution of internal process and technology gaps, but also alignment externally with multiple vendors, CCPs, exchanges, and market cut-offs. This reinforces the need to streamline settlement processes and operating model well ahead of the mandated timeline. We hope to see alignment between the EU/CH and UK timelines to minimise any unnecessary costs and complications.
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Footnotes:
1 Industry hit by ‘significant funding gaps’ after switch to T+1, Citi says