DTCC Consulting recently hosted a virtual event, “Operational Excellence in the Face of Constant Change,” where industry leaders discussed the challenges and opportunities of moving to a T+1 settlement cycle across Europe.
Ready to take the next step? Watch the event replay and discover how DTCC Consulting can help your firm navigate the transition to T+1 with confidence.
1. Alignment Across the UK and EU Will Be critical
The UK Accelerated Settlement Taskforce published its implementation plan to transition to T+1 in February, and the EU T+1 Industry Committee released their T+1 recommendations in June. As Giovanni Sabatini, chair of the EU T+1 Industry Committee, clarified, while the Committee has set up a complex governance to drive this process, these documents are recommendations, not regulation.
“We are working on delivering what we call a handbook – the instruction manual – with best practices on how to adhere to our recommendation,” said Sabatini. “Our recommendations are not mandatory; we are an industry body, so we are not regulators or supervisors.”
Alignment across Europe is critical: DTCC has been supporting market participants in their preparations by collaborating on recommendations and providing data to help shape the transition.
2. Firms Must Plan and Budget for T+1 in 2026
Major financial market participants, especially those with legacy technology, may have to invest in upgrading systems to handle the compressed timeframe, and costs for automating manual processes are a key part of the migration. However, as seen in the U.S. transition to T+1, while initial project costs could be high, the transition is expected to lead to significant long-term benefits.
“The general consensus seems to be that people are moving along that continuum from not having done anything through to having secured budget and made plans for 2026,” said Andrew Douglas, co-chair of the UK T+1 Taskforce. “It's not too late to start, but it soon will be too late to conclude.
“You should be getting budgetary approval to do the work that needs to be done in 2026, to be ready to start testing in 2027,” Douglas advised.
DTCC's consultants have been actively engaged with readiness assessments to help firms understand the nuances of how the move to T+1 will affect their specific operations, data and technology.
3. Firms Could Face Penalties – and Market Fallout – Under New Settlement Rules
Firms should already be considering the range of their impacted operations – across the entire lifecycle of the transaction – and understand both their own impacted processes as well as those of their counterparties.
While the UK decided not to implement the full mandatory buy-in regime of the EU's Central Securities Depositories Regulation (CSDR), the financial penalty mechanism for failed trades still applies for UK firms dealing with EU counterparties. This can result in significant financial impacts.
“There will be two consequences for those firms who do not comply,” said Douglas. “First is a financial penalty regime operated by CREST in the UK. If you settle late, you will be fined, and the person settling on your behalf will be fined. And secondly, there is an up-chain impact, which is people will not want to pay for your inefficiency, so they stop wanting to work with you. So, if you want to be a participant in the market, you will need to be able to adhere to the market requirements and to market practices.”
4. Europe Is a Complex Financial Landscape
Moving to T+1 in EU and UK markets in October 2027 will be markedly different than T+1 in the U.S. The EU is juggling a fragmented landscape of 27 separate jurisdictions, with differences in national legislation, preparedness and size and complexities of market infrastructure. This presents challenges around cross-border settlement, inventory management and funding transparency. Firms need to align not only with differing industry guidelines, but also with time dependencies and operational requirements varying by market.
As the panelists discussed, in the U.S., it was predominantly the broker community who bore the heavy lift of T+1 compliance; in the UK and EU, both buy-side and sell-side firms will have to share the responsibility. This dual accountability also adds layers of complexity and coordination.
“You're talking about a very different experience,” said Barnaby Nelson, CEO and founder of the research firm, The Value Exchange. “So, anyone thinking, ‘I'll just do what I did last time and just wait for my broker and custodian to be ready.’ For me, that's one of the major areas of concern, that the fund managers need to be in all of this right now and not letting their service providers lead.”
5. UK and EU Set to Launch Joint T+1 Testing in 2027
There is a proposal to make testing available from January 2027, and the UK and the EU are working closely together to provide a common test plan, as much as possible.
The UK T+1 Taskforce and the EU T+1 Industry Committee “have done a fantastic job putting the documentation together, the recommendations and the roadmap,” said David Kirby, Managing Director, DTCC Consulting’s Securities Practice. “And now I think it's incumbent upon the firms to do their part as far as the overall readiness.”
Firms are encouraged to use this period to enhance controls, address settlement issues, and optimize their operations.
DTCC Consulting teams have already been engaged in helping design and implement new operating models and technical architectures that can support the demands of a shorter settlement cycle.
“We can help,” Kirby added.