Introduction 

Securities settlement (the process whereby the obligations of a buyer to make payment and of a seller to deliver securities are completed) underpins sales and purchases, collateral, margining, financial derivatives, repurchase transactions, securities lending and other activities in the international capital markets. Standard settlement times are based on the ‘T+’ model, which is the time in which a standard transaction should be completed. Standard settlement times for securities transactions has reduced incrementally from T+5 in the 1990s to today’s European standard of 2 days (T+2). Now three jurisdictions – the European Union, the United Kingdom and Switzerland - have announced the intention to further reduce settlement times to T+1 with effect from 11th October 2027. 

1. Reasons for the change 

The Europeans have identified the need to keep pace with competitor markets and recognised that the global nature of securities transactions and trading parties require continued alignment with markets which have moved to faster settlement times. Longer settlement increases risk, requires more collateral to support and demands liquidity. All of these contribute to higher costs in securities trading. The central aim of reducing settlement times is therefore to maintain competition whilst reducing cost and risk for market participants. 

Changes to legislation such as the EU’s Central Securities Depository Regulation (CSDR) appear simple but the reality is that the transition will be complex, potentially expensive and time intensive. Although there are good reasons for the transition, a cost will fall on firms and their clients during the implementation period, even if there are benefits to be had on the other side. 

2. Amendment to EU, U.K. and Swiss rules 

The declaration of a common goal by these 3 jurisdictions does not necessarily mean that they will align perfectly with one another or with other jurisdictions. There is potential for misalignment in specific areas which market participants need to look out for, such as exactly which instruments are in-scope in each jurisdiction. The three jurisdictions are also competitors. As such there are three change programs which market participants need to keep abreast of: 

• The European Securities and Markets Authority’s report on shortening the settlement cycle of 2024 prompted the 2025 proposal by the European Commission to amend Article 5 of the Central Securities Depository Regulation. This is a simple amendment to the current legal text, changing settlement from T+2 to T+1.  

• In the U.K. the Accelerated Settlement Task Force was formed and reported to the government in 2024. In February 2025 the Technical Group’s report recommended 12 ‘critical’ and 26 ‘highly recommended’ actions to facilitate a successful transition, which were accepted. The legislative change will be to the U.K. Central Securities Depository Regulations.  

• In Switzerland and Liechtenstein (where EU CSDR applies) the Swiss Securities Post-Trade Council (Swiss SPTC) recommended the move to T+1 and the Swiss SPTC Task Force will lead the workflows. 

3. Learning from the experience of the Americas 

In 2024, the U.S., Canada and Mexico1 transitioned to T+1 settlement. The benefit to the Europeans is that they can utilise the lessons learned from those experiences, taking advantage of publicly available materials. Some global firms have already gone some way to transition in their response to programs in other jurisdictions. Although the 2024 Americas’ transition went relatively smoothly there were issues which arose, such as a lack of automated capacity which meant that the industry incurred significant staffing stresses and increased costs and the focus for the Europeans will be automation in areas such as standard settlement instructions, corporate actions and stock lending recalls. That is easier to say than to do, of course, and the costs of technology investment and upgrade was high for the Americas, as it will likely be for the Europeans. 

Although market commentators described the 2024 transition as relatively smooth there were reports of continuing challenges in the months after the transition date.2 This included funding costs of transactions, in part due to misalignment between T+2 and T+1 systems, and carrying the necessary liquidity. A further example was the ‘Thursday problem’, whereby trading volumes dropped on Friday due to the cost of carrying open positions over the weekend. Again, this was in part caused by misalignment of settlement times with other jurisdictions still using T+2; this may be less of a challenge as more countries transition, however. 

The Europeans will also enjoy the benefit of U.S. materials and documented discussions such as the T+1 Securities Settlement Industry Implementation Playbook3 published by industry bodies, which provides a road map and issues list for easy reference. 

4. Understanding complexity in Europe 

The continent of Europe holds a wider challenge beyond alignment of the EU, U.K. and Switzerland and Lichenstein. Its settlement infrastructure is fragmented (with nearly 40 individual settlement infrastructures) with no equivalent central organisation to the U.S. DTCC. EMSA have highlighted these issues, adding to the list the unharmonised nature of national securities laws. There is some mitigation in the presence of central securities depositories such as the Euroclear and Clearstream groups who provide services across multiple countries. The challenge for individual firms or groups will be more significant where that firm’s client offering is multi-jurisdictional. 

5. Legal documents will need review and revision 

Legal documentation supporting trading in securities is far from being uniform. It consists of a combination of market standard agreements such as ISDAs, ISLAs and GMRAs as well as bespoke agreements created by each financial services firm, clearer or intermediary. Exactly how this range of documents capture settlement varies: in some cases, it is specifically written into the contract, in others into the trade confirmations, or into terms and conditions or it may be undocumented. This means that legal documents will need to be reviewed and potentially amended to allow the new T+1 regime to govern settlement. Given that there are penalties for settlement failures, it is advisable to be clear about the parties’ respective duties in the contract and what constitutes settlement failure in the T+1 environment. 

As well as trading agreements between firms and clients, firms will need to look at their vendor and services agreements, including those with central securities depositories, to ensure they also align to the new T+1 regime. Where settlement is supported by external parties, the expectation will be for vendors to support a firm’s transition. 

Customer notices, information documents and communications will also need review and likely remediation. 

Finally, internal process documentation such as policies and procedures – which have taken on additional importance in recent years through requirements around enhanced operational resilience – will need review and revision. 

6. Operational and technological changes will be required 

Increased automation is one of the keys to successful transition, but this is never a straightforward process and for market participants will involve additional expense. In addition to potential investment in new technology, existing systems will need configuration, including trading systems and platforms, funding processes, payment mechanisms, matching and affirmation process and communication tools. Additionally reference data such as SSIs will need to be updated in line with the external settlement systems infrastructure. A firm’s clients will also need to adapt in line the firms they deal with and the markets they operate in. 

As always, testing will need to be conducted before the go-live date to identify potential issues. 

7. There are penalties for settlement failures 

The current regulations include penalties for settlement failures, applied by central securities depositories. The risk to firms and their clients in transitioning to T+1 is that settlement failures increase and poor implementation of the change process becomes an expensive exercise. The experience of the Americas was that whilst significant failures were avoided, it was in a large part due to the efforts of settlement personnel working long hours before and after the switch-over period. To avoid significant costs – whether paying for manual solutions or in settlement penalties – a thorough readiness strategy will be essential. 

There was a case made during the 2024 transition that settlement penalties be reduced during the introduction of T+1 clearing and the same issue will likely be relevant for the European program. 

8. Regulatory project congestion 

The U.S. is introducing clearing for transactions in treasury securities for in December 2026 and June 20274. This U.S. regulation impacts European activity in U.S. treasury secondary market sales and purchases and repo transactions. This means that the delivery program for two significant rules changes will overlap, creating a significant workload. This may be helped by a potential exclusion of transactions which fall under the Securities Financial Transactions Regulation from European Union’s T+1 transition.  

In addition, firms may also be dealing with changes required by CRD VI, such as branch requirements for third country firms being introduced in January 20275 and the revisions to the Payment Services Directive, also due for 20276. 

9. What should you be doing now? 

As always, there is never enough time and far out deadlines arrive remarkably quickly. Today, if you are in scope, you should: 

• Prepare a review of current securities trading activity. A starting point, refer to the T+1 Securities Settlement Industry Implementation Playbook which helpfully breaks down workstreams and tasks across specific markets. 

• Take the time to research the experience of the Americas in their 2024 transition. 

• Incorporate the other regulatory change programs impacting your organisation and identify commonalities and complications in adhering to each requirement. 

• Identify your technology and systems which may be in-scope for configuration and whether you will need to engage vendors for this process. 

• Engage with and follow trading infrastructure providers such as settlement systems and third parties you use. 

• Identify the specific rule changes and associated communications prepared for each jurisdiction and follow them for updates. Join or follow industry bodies and public groups. 

• Identify your legal documents are review their current provisions on settlement that may require amendments. Review your internal processes, procedures and documentation. Start to think about testing ahead of go-live. 

• Prepare client and vendor outreach, including materials, setting out timelines and expectations around your transition program. 

10. After T+1, is it real time settlement the next goal?  

The established settlements industry is clearly aware of the growth in competition from digital assets and instant settlement. The T+1 transition is, in part, a response to that growth but the road from T+1 to T+0 or real time settlement is not straight. Traditional settlement still relies on the banking infrastructure and will require significant investment to create an automated infrastructure. Whilst this is the general direction of travel, the future of settlements infrastructure is difficult to predict. What is probably better advice is that, in planning the infrastructure changes that need to be made to reach T+1, market participants leave the door as much as possible to future developments.  

How can Temple Consulting help? 

Temple Consulting is a consultancy of experts in U.K., EU and international law and regulation. Our depth of knowledge and experience is such, that we understand not only how our clients work but also their commercial objectives and imperatives, which invariably are budget and time sensitive. This is why each mandate necessarily is costed according both to the nature of the work to be undertaken, and your desired outcome as well as the time frame and budget within which delivery is required. We provide an experienced and trusted talent pool from which they select the best fit for each project. In relation to our talent pool, we partner with bankers, accountants and lawyers - only those with whom we have worked previously and successfully. Temple Square Chambers can provide legal advice to supplement your project requirements. 

At Temple we have capital markets, securities trading, legal documentation and regulatory change specialists, making us an ideal partner for all your financial regulatory needs. 

Keith Blizzard is a Barrister and specialist financial markets lawyer with over 20 years’ experience, including trading, clearing, document negotiation (particularly GMRA, ISDA, GMSLA) and large-scale regulatory projects.