In its assessment of the shortening of the settlement cycle in the EU, published in mid-November, European Securities and Markets Authority (ESMA) recommended that the European single market should move to T+1 in Q4 2027 and referenced October 11, 2027, as the optimal date for transition to T+1 in the EU.
ESMA’s statement that “a coordinated approach across Europe is desirable” appears to have been heeded in the UK, where this month the country’s Accelerated Settlement Taskforce (AST) recommended that the UK coordinate its move to a T+1 settlement cycle for securities on that 2027 date, in line with European counterparts.
Given that, until the adoption of the Central Securities Depositories Regulation (CSDR) in 2014, the length of the securities settlement cycle was not even harmonised in the EU, these are significant developments.
ESMA acknowledges that moving to next-day settlement requires improvements to be made to avoid increasing operational risks, which could otherwise translate into an increase in settlement fails.
It specifically refers to the automation of processes such as trade confirmations, allocations and matching leading to reduced error rates.
