[ I N D E P T H | S E T T L E M E N T ] ed engaging with the brokers ’ association and our board to move to T + 1 at the same time as the US .” South America ’ s largest single equities market by far – Brazil – is conducting its own study to reduce the equity settlement cycle to T + 1 in line with the main global markets trend “ in order to map impacts and opportunities for improving posttrade processes to enable a safe transition in the Brazilian market ”. Brazil moved from T + 3 to T + 2 in 2019 and will continue the study throughout 2023 . Other markets in the Americas are exploring the move – but this speaks to the surprise that the US has moved so quickly to its transition that other markets have not yet established their own timelines for alignment .
Across the pond On the other side of the Atlantic , the US announcement sparked widespread discussions throughout the UK and Europe about shortening their own settlement cycle . It feels like Europe may be dragged kicking and screaming over the line if its transition occurs within the next three years ( driven by US alignment ), while a more independent approach to the decision ( operating on its own timeline regardless of the US ) would see its move occur around five years from now . The big decision for Europe is whether the challenges of lagging behind the US puts it at a disadvantage or causes too many headaches for market participants based in the continent , versus the benefits of moving – reduced settlement risk , liquidity upsides and a drop in margin and collateral requirements . It ’ s an understatement to say there are a lot of factors for Europe to consider – fragmentation of the region with multiple central counterparties and central securities depositories , different currencies under a single market and the fact that settlement fails are now penalised under regulation . A hurried move to T + 1 would inevitably see an uptick in fail rates , which are already worryingly high . Europe would also face similar issues to the US around FX , corporate actions , and ETFs , alongside the whole raft of additional headaches and considerations . This isn ’ t to say the move shouldn ’ t occur , but we could be waiting some time , while all factors are properly considered . For now ,
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