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settlement cycle in the EU . In addition , the taskforce recommended added that public authorities should avoid implementing complex changes to the CSDR cash penalty rules in advance of the transition to T + 1 . Elsewhere , the taskforce stated that ESMA should consult as planned on “ measures to reduce settlement fails ” and make a determination as to whether further regulatory changes are necessary to support enhanced settlement efficiency , and which of these changes , if any , should be sequenced before a move to T + 1 .
Better together ? With regards to the UK and EU aligning , Meghani is optimistic , saying , “ There are hopes that the UK can have a co-ordinated plan with the EU and Switzerland which will be an outcome that can support market stability , whilst also allowing firms to use collective resources to deliver such a change .” He stresses that the UK and EU should put in place a governance to be able to assess whether having a coordinated approach makes sense , which might not be the same thing as moving together at the same time . “ If EU jurisdictions decide to move to T + 1 closer to 2027 , when the UK also plans to transition , this could significantly impact readiness . The US faced similar challenges as many neighbouring markets decided to move very close to the go-live date ,” says Meghani . Canada and Mexico aligned their T + 1 transitions with the US to maintain market consistency , while Brazil and Peru followed shortly after . On the flip side , Douglas gives a different response about the UK ’ s position , responding to speculation about the UK ' s alignment with the EU . “ This isn ’ t about us aligning with the EU . We ’ ve made our decision to move in Q4 2027 ,” said Douglas at a conference at the start of Q3 . “ The question is whether the EU can move in the same timeframe . We ' ve chosen this date to strike a balance – being
“ While there ' s no reward for getting it right , there are definitely penalties for getting it wrong .”
ANDREW DOUGLAS , CHAIR OF THE UK T + 1 TASKFORCE TECHNICAL GROUP
“ It ’ s ironic to hear people discuss AI , machine learning , and DLT when faxes are still in use .”
VAL WOTTON , MANAGING DIRECTOR AND GENERAL MANAGER , DTCC
ready without rushing into a migration that could bring significant risks .” Douglas stressed that careful planning is essential to avoid the potential pitfalls of halving the settlement time , such as skyrocketing costs or failed implementation . “ While there ' s no reward for getting it right , there are definitely penalties for getting it wrong ,” he said . The UK ’ s strategy , in his view , is neither too slow nor too hasty - just the right pace to ensure success .
Final thoughts If we assume transition dates will be somewhere towards the end of 2027 , there is no reason for firms to not start preparing now . “ Let ’ s avoid a last-minute rush and instead focus on becoming as efficient as possible today ,” said Wotton . “ For the UK and Europe , there ’ s no reason to delay investment and automation . The move to T + 1 is coming , so let ’ s embrace the change and start investing in automation now .” Securing early investment is important , suggesting that a phased approach could help the UK and Europe transition smoothly , allowing firms to adjust gradually instead of facing a sudden overhaul .
“ This would enable firms to make progress and monitor their readiness , reducing the pressure of a ‘ big bang ’ transition like the one we saw in the US ,” added Wotton . “ We can ' t afford to kick the can down the road .”
38 Global Custodian Fall 2024