In November, the European regulator ESMA published plans for the EU to move to a T+1 settlement cycle no later than October 11, 2027, with the UK agreeing to the same deadline earlier this year.
The move to a shorter settlement is expected to release more than £1 billion of margin in the UK due to lower counterparty risks – echoing the benefits seen in the US, where the T+1 transition in May has already seen an estimated reduction in clearing default funding of around US$2 billion.
Speaking at the launch of the UK transition plan last month, the Bank of England’s executive director of financial market infrastructure Sasha Mills stressed that a shorter settlement cycle reduces counterparty risk for both firms and central clearing counterparties (CCPs), which should result in “significant amounts of margin being released by CCPs to members and their clients”.
Andrew Douglas, chair of the UK Accelerated Settlement Taskforce, and Jeff Mooney, the associate director at the US Securities and Exchange Commission’s Office of Clearance and Settlement, Trading and Markets, joined Matt Johnson, executive director of international strategy at DTCC, Huw Gronow, head of dealing at Newton Investment Management, and Tanith Johnson, European head of operations at agency broker Instinet, to discuss the critical future of trade processing and the path to increased global efficiency at the FIX EMEA Trading Conference, held in London earlier this month.
