This article was originally published to WatersTechnology on April 21, 2025.
T+1 is coming in Europe, and Asian firms should assess impacts and begin preparations now, says the DTCC’s Val Wotton.
With more than 55% of global activity settling on T+1 today, we can expect to see a more profound shift in settlement efficiency across the global financial ecosystem as the UK, Switzerland, Liechtenstein, and the EU commence their T+1 settlement cycle on October 11, 2027.
Having successfully participated in the US shift to T+1 in May 2024, can market participants in Asia apply the practical knowledge and hands-on learnings to support the next major transition in Europe? Are there specific regional challenges and nuances that Asia should consider when trading with counterparties in Europe?
Regulatory and Local Market Compliance
As the regulatory landscape varies across markets, Asian firms should conduct a thorough review and assessment of the transition demands for each country or region and identify specific operational workflows required for trade matching, allocation, and confirmation.
It is also helpful to consider other regulatory demands—such as the need to keep electronic records of transactions—as was the case with the US transition. Based on these evaluations, Asian firms will be in a better position to map out the process refinements and system upgrades needed for trades to be settled within the stipulated deadline.
While the UK does not impose any penalties for trades that miss the settlement deadline, reputational risk remains a concern for firms in Asia. In contrast, the EU enforces penalties for trades that do not settle on the intended date under the Settlement Discipline Regime (SDR) of the Central Securities Depositories Regulation (CSDR), designed to enhance the safety and efficiency of securities settlement.
Time Zone Complexity
The approximate eight-hour time zone gap between Asia and Europe is significantly more challenging to manage, as there is only a limited window to resolve exceptions compared to the 12-hour time difference between Asia and the US. That said, there are still adjustments needed for Asian firms without global operations to cover Asia’s morning shifts and weekends for T+1 in the US, since its morning coincides with the US market close.
Should there be any variance in settlement deadlines between European domestic and foreign firms in the final rules to be implemented, and if the cut-off time is fixed at 6 am local time on T+1 for foreign firms, Asian firms will need to conclude settlement processing in the early morning of BST or CET—while considering custodian processing timelines.
Increased automation and leveraging post-trade automation—as emphasized in the European Securities and Markets Authority’s final report and the UK’s published Accelerated Settlement Taskforce (UK AST) UK T+1 Code of Conduct—is a key enabler of T+1 settlement and is essential to achieving settlement efficiency and completion.
Greater post-trade automation eliminates manual touchpoints across the post-trade cycle and enhances operational efficiency while increasing market participants’ focus on standardization. Moreover, an automated framework can also enable swift and precise issue detection and efficient resolution of trade mismatches and exceptions to facilitate same-day confirmation and settlement.
Data Integrity
Automation must be paired with accurate and reliable data for timely and efficient post-trade processing. Incomplete or inaccurate standing settlement instructions (SSIs) have been cited among the main causes for settlement fails. The reason? Firms are still sharing SSIs manually with their counterparties, which requires more time to verify or search for accurate SSIs across multiple sources.
Additionally, using internal SSI data stores with outdated or stale data further hinders the process. Under shortened settlement timelines, it is important for the firms to leverage an automated, standardized online repository to store, retrieve and communicate SSIs.
The Financial Markets Standards Board’s (FMSB) Standard for Sharing of Standard Settlement Instructions emphasized the importance of sharing SSIs in a standardized format for timely trade settlement. The need for automated SSIs is also recommended by the UK AST in its February 2025 report and the European T+1 Taskforce is expected to adopt a similar stance.
There is also value in using additional identifiers such as the Unique Transaction Identifiers (UTIs) as part of data capture during the allocation-confirmation process to help track trade status throughout the post-trade processing chain. There should be no delay in sharing golden source SSI data, as proven solutions are available today alongside central matching platforms that offer efficient data management capabilities to create UTIs.
Multi-Central Securities Depositories
Aside from managing different regulatory requirements and local post-trade settlement cut-off times, there are more than 30 CSDs in Europe—requiring coordination in settlement management. To ensure that securities are delivered to the right location, some firms may leverage central matching solutions with automated place of settlement (PSET) functionality as an add-on matching measure to enable prompt cross-market trade reconciliation and information exchange.
In the UK AST, PSET is recommended as a data point to be included in trade allocations, confirmations, and settlement instructions to help manage settlement efficiencies.
Operational Resilience
When preparing for accelerated settlement in Europe, Asian firms should leverage this opportunity to holistically evaluate their middle and back-office functions and assess how they can achieve T+1 operational excellence across their organizations.
This requires an integrated approach that synchronizes people, processes, and technologies—built on a resilient, robust, and scalable infrastructure framework—to ensure uninterrupted business operations during unplanned events. The focus areas should include implementing a robust business continuity and risk management strategy to continually enhance processes to mitigate potential risks impacting timely settlement completion.
It is also important to consider dependency risks, such as ensuring reliable support from third-party providers and protecting post-trade processing from cyberattacks and other emerging risks.
Accelerating Change
It is clear that the move to T+1 across more markets is coming. Firms have already raised concerns of an increase in trading costs to bridge funding gaps resulting from misaligned settlement cycles between, for example, an Asian fund settling on T+2 and the fund’s underlying US securities settling on T+1.
While the push to accelerate settlement cycles may differ across countries and regions, standardizing settlement timelines at the international level is the desired endpoint—to bring about common benefits such as new efficiencies and capital and cost reductions. We witnessed markets move to T+3 in the 1990s and the move to T+2 in the last decade.
T+1 is coming, and firms should assess impacts and begin preparations now. It is important for firms to commence T+1 discussions now to proactively identify scalable technical solutions, initiate budget talks, and mobilize resources or engage external consultants—ahead of the anticipated change.