Treliant Takeaway…EU Securities Settlement T+1 Adoption – 2025, a Critical Year

EU Securities Settlement T+1 Adoption

Takeaway

The European Securities and Markets Authority (ESMA) has been mandated to improve securities settlement in the European Union and on central securities depositories. Working with members of the European System of Central Banks (ESCB), an initiative was undertaken to look at the appropriateness, impacts, costs, and benefits with a view to proposing a detailed roadmap towards shortening the securities settlement cycle in the EU.

The transition to T+1 for securities settlement has been globally underway for several years with China, India, the U.S., and Canada among those to have already made the move. Treliant helps global banking institutions manage large scale change, with a focus on regulation and data. We help organizations adopt best practices and leading standards across clearing and settlement processes, data management, and reporting, providing a robust and sustainable platform that institutions can leverage to drive regulatory compliance, business efficiencies, and improved insights through enhanced analytics.

Highlights

In November 2024, ESMA published a report recommending that the transition to T+1 take place simultaneously for all relevant instruments on October 11, 2027, offering the following benefits to participants and the broader securities market:

• Help promote settlement efficiency and increase the resilience of EU capital markets.
• Develop deeper and more liquid capital markets.
• Avoid market fragmentation, costs, and reduce risk linked to misalignment between the EU and other global financial markets.
• Future proof the industry by setting a maximum duration for the settlement cycle of T+1, whilst allowing market participants to settle their transactions faster at T+0.

Regardless of the transition date to T+1, EU government bodies are seeking to mandate that the necessary operational changes be completed by 2025 including:

• Developing or updating process and operating models to generate reports, perform reconciliations, and remediate transactional data breaks and inaccuracies.
• Adopting standardized onboarding procedures for all new accounts, including the required data for trade settlement.
• Implementing solutions for sharing standing settlement instructions (SSI).
• Aligning with market standards for allocations, confirmations, and trade level matching on the actual trade date.
• Ensuring settlement instructions are sent on the actual trade date
• Implementing market standards for securities lending recalls.

What This Means for Financial Institutions

It is highly recommended that firms begin assessing the impact of this rule. A robust implementation plan and holistic view of compliance activities are paramount to making sure T+1 settlement can be achieved. Due to the regional and multi-entity nature of securities businesses, implementation aspects are likely to be complex and require acceleration to comply with the deadline for implementation of any operational changes.

If you do not have a clear plan, now is the time to act!

However, this is just the beginning. Across international capital markets, there remains a strong push to shorten standard securities settlement cycles even further, with T+0 as the next goal.  While timelines and regulations for this transition have yet to be determined, it is clear that the industry still has significant work ahead.

Sources:

• ESMA proposes to move to T+1 by October 2027
• EC proposes 2027 migration to T+1
• Shortening the standard securities settlement cycle in the European Union: next steps – European Commission
• Accelerated_Settlement_Technical_Group_report_-_Feb_2025.pdf