[ N E W S R E V I E W | T + 1 ]
The T + 1 Thursday conundrum pushing instantaneous settlement on traders
The upcoming European and UK transition to a T + 1 settlement cycle could see firms pushed to explore instantaneous settlement on some ETF trades, a process which could be wrought with operational challenges, The TRADE has learnt.
The move to T + 1 settlement cycle across Europe’ s markets in October 2027 means misalignment with the US with regards to ETFs trading will no longer be a problem, however there will still be divergence with other markets which remain on T + 2.
Enter the Thursday conundrum 2.0 – an inverse of the similar style challenge from the US move in May 2024.
Given the difference between the settlement regimes in the US, and in the UK and Europe following the May 2024 transition, a drop off in ETF volumes was noted on a Thursday due to the fact that brokers would in some cases have to fund positions over the weekend and were therefore charging a premium for trading.
Following a similar issue with the US move to T + 1, the second iteration of Thursday conundrum for ETFs trades has emerged as divergent settlement systems around the globe continue to cause headaches for traders.
The TRADE’ s coverage of the subject garnered a lot of industry attention as just one of the pain points created by divergent settlement regimes globally following the US’ decision to move to T + 1 settlement last year.
Speaking at the CMX conference in 2024, Jim Goldie, EMEA head of capital markets, ETFs and indexed strategies, Invesco, said:“ Additional funding over the weekend will manifest itself through wider spreads. A few bps matters. Brokers are pricing two different levels, one for T + 1 settlement and one more expensive option for T + 2 settlement. We’ re in a suboptimal place with global misalignment.”
Global misalignment Given that Europe and the UK have now confirmed they will be moving to T + 1 settlement in
October 2027 and aligning with the US, many thought that the end of two-tiered pricing and issues relating to volumes on a Thursday was nigh. However, the October transition is set to create a new pain point with other global markets when it comes to ETF trading.
After sitting down with Goldie in the Summer to unpack the UK and European roadmap to T + 1, a process that he has been central to, The TRADE has learnt that an inversed version of the Thursday conundrum is set to take centre stage in ETFs trading thanks to a misalignment with other global markets that remain on T + 2.
As opposed to buying ETFs tracking US securities at a premium on a Thursday, the industry could now see a dynamic where ETFs containing global T + 2 securities are being sold at a
48 // TheTRADE // Q3 2025