Key Takeaways
- On February 6, the UK T+1 Accelerated Settlement Taskforce (UK AST) published its implementation plan for the UK’s transition from T+2 to T+1.
- The plan includes a Code of Conduct and confirms that October 11, 2027 will be the first trading date in UK cash equities for settlement on a T+1 cycle.
- The Swiss Post Trade Council (swissSPTC) and the European Securities and Markets Authority (ESMA) have adopted the same migration date.
- The UK AST Code of Conduct includes recommendations for the automation of post trade processes including SSIs to enable same day allocation and confirmation, corporate actions, and stock lending recalls, and urges market participants to start planning now.
DTCC Connection spoke to Matt Johnson, DTCC Executive Director, Institutional Trade Processing Product Management and Industry Relations, to discuss the publication of the UK AST implementation plan, why alignment across Europe is important and how DTCC can assist market participants in their preparations.
Related: Understanding What’s Next for T+1 in the UK and Europe
DC: Why is the publication of the UK AST implementation plan a significant development in the UK’s journey to T+1?
MJ: The UK moving to a T+1 settlement cycle is a significant market event that impacts a vast number of institutions and market participants, so it is imperative that it is implemented in a manner which takes into account the needs of such participants, as well as other factors such as learnings from shortened settlement in other jurisdictions, and consistency, where appropriate.
The UK AST’s consultation in Q4 2024 invited market participants to review and provide feedback on the AST recommendations for a transition to T+1. Comprehensive feedback, reflecting the spectrum of industry needs, enabled the UK AST, regulators and policymakers to shape the implementation plan. The publication of the implementation plan is the culmination of all of those efforts and collaboration across the industry and is a significant milestone in the UK’s journey to T+1.
DC: The EU, Switzerland and Liechtenstein have announced the same migration date as the UK. Why is it important that European markets are aligned in terms of timing?
MJ: There is market infrastructure fragmentation across the European Economic Area (EEA), which can make cross-border settlement complicated, and will likely be even more so by T+1. Securities markets in the EEA operate in a very similar fashion in regard to the way transactions are agreed and instructed to the CSD, where an additional pre-settlement match occurs.
The vast majority of our clients invest across global markets. Having a unified T+1 migration will allow complete alignment across every market and remove the need for clients to create specific workflows or adopt nuanced processes. Synchronized accelerated cycles also pave the way to introduce full automation and straight through processing.
DC: One of the key recommendations of the UK AST’s implementation plan is automation. Why are automation initiatives so critical to the successful implementation of T+1?
MJ: The faster and more accurately a trade is matched between buyers and sellers, the higher the likelihood it will settle on the intended settlement date. As observed in the U.S.’ move to T+1 settlement, the automation of post-trade processes is critical to achieving T+1 settlement. Automation initiatives are key to driving efficiency, reducing risk and enhancing transparency in post-trade processes across jurisdictions.
In its implementation plan, the UK AST recommends that market participants begin preparing for an accelerated settlement cycle by implementing automated trade solutions to achieve T+1 settlement as soon as possible. In particular, the UK AST’s calls the completion of allocation and confirmation processes no later than 23:59 UK time on trade date (T+0). Automation is a key enabler for same day allocation and confirmation, helping market participants achieve T+1 settlement on all trades.
DC: Market participants in the UK, EU and Switzerland have been urged to start planning for accelerated settlement now. Where should market participants start with their preparations?
MJ: Market participants need to start automating their post-trade lifecycle processes now to make T+1 a seamless and successful transition. Our solutions help firms achieve the level of automation required to meet accelerated settlement timelines. Our expert consultants stand ready to support firms as they consider the impact of T+1 on their operations and develop plans to achieve readiness, and our CTM® and ALERT® solutions play a pivotal role in enabling firms to comply with the AST recommendations.
From a data perspective, DTCC’s CTM is the only matching platform that can provide a granular level of detailed analysis across allocation, and from a transaction, data and analytics perspective. This will be instrumental as we begin to engage with EU market infrastructure, regulators and policy makers. This data is highly valuable to market participants as they prepare for the move to T+1.
In addition to the speed of allocation and confirmation, we can also help with the quality of information being provided. CTM has the ability to enrich additional information required for settlement such as Place of Settlement (PSET) and also the Standing Settlement Instructions (SSIs) from the ALERT SSI repository. This allows our clients to lock in economic reference data as a way to further mitigate settlement risk.
Our Consulting Services experts can define and implement the right control and process enhancements, benchmark firm performance, address settlement fails, manage product implementation, revamp technical architecture, optimize overall trade processing operations and more.