Taskforce Calls on UK, EU and Switzerland for T+1 Alignment
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A taskforce representing buy and sell-side firms and market infrastructure providers in Europe has urged the UK, Switzerland, and the EU to conduct plans that will lower the settlement cycle needed for securities trades.
The group has made this request at a time when the UK is planning on switching to next-day settlement (T+1). The UK seeks to move to T+1 by 2027.
Taskforce Calls for T+1 Alignment
The taskforce is supportive of the plan made by the UK to introduce T+1 by 2027. However, the success of that plan depends upon the willingness of the EU to commit to T+1 within a timeline aligning with its own.
After the EU commits to the T+1, there will be room for simultaneous adoption. The changes come amid a notable increase in interest for T+1 settlement, because of the US. The US will start T+1 settlement in May this year, which is considering other regulators to consider a similar move and align their markets.
The EU, UK and Switzerland are planning to align to the same cycle or face the risk of costly lags in securities trades. The taskforce is also working on boosting collaboration between regulators to lower the possibility of a disruption.
The taskforce says that by aligning the dates for the T+1 settlement, it will make it easy for firms to implement projects in multiple countries. It will also reduce the issues linked to trading and settling instruments across Europe.
“We anticipate that alignment of dates will reduce the complexity of implementation projects for firms active across multiple jurisdictions, and minimize scoping issues related to instruments listed, traded and settled across geographical Europe,” the taskforce said.
The taskforce has also said that it operates with a shared ambition. It seeks to create an integrated post-trade environment that is efficient, safe, resilient and low-cost. This environment will support the competitiveness of the European securities markets.
The taskforce also seeks that the post-trade environment operates with high levels of automation and standardization. Doing so will make the experience better for everyone involved.
Technology is Playing a Role in Shortening Settlement Cycles
Advancements in the technological industry are playing a major role in enabling shorter settlement cycles. With short settlement cycles comes the need for automation and digitization for efficient trade processing and seamless coordination among market participants.
Some new technologies creating the need for T+1 settlement are distributed ledger technology (DLT) and blockchain. These technologies seek to boost transparency, lower operational risks and lower settlement times.
Market participants can tap the benefits of reduced settlement cycles. They can do this by investing in better it infrastructure, supporting digital solutions an leveraging standardized protocols.
Automated systems can also be used to confirm trades, reconcile, and report, leading to fast cycle times and better accuracy. By leveraging analytical tools and real-time data, market participants can manage risk better and make informed decisions.
