THETRADETECH DAILY news
THE OFFICIAL NEWSPAPER OF TRADETECH 2024
Post-trade
UK taskforce recommends T + 1 settlement by the end of 2027 in two-phase approach
TASKFORCE STATES THAT THE UK , EU AND OTHER EUROPEAN JURISDICTIONS SHOULD ALIGN ON T + 1 WITH A REGIONAL TIMEFRAME POSSIBLY OVERRIDING THE TIMELINE .
The UK ’ s Accelerated Settlement Taskforce has recommended a two-phased approach to shortening the settlement cycle beginning with operational changes in 2025 and a full transition by the end of 2027 .
The two-phased process would initially see some operational and behavioural changes mandated for 2025 to enable the market to prepare in advance of the formal move .
In its report , the group added however , that if the EU commits to move to T + 1 within a timeframe that aligns with the UK ’ s plans , simultaneous adoption should be considered .
The taskforce also recommended a Technical Group should be established , comprising operational and market experts to work through the details including how changes can be best implemented to enable a smooth transition to T + 1 .
Andrew Douglas , who has worked for 35 years in the post-trade industry , most recently with DTCC , will lead the group , which will report later this year to confirm the dates for both phases of the transition .
More than 80 trade associations and industry participants have volunteered to support the Technical Group . These include AFME , Baillie Gifford , Brown Brothers Harriman , DTCC , Euroclear , FMSB , Forvis , Goldman Sachs , ICMA , ISITC Europe , ISLA , JP Morgan , Linklaters , LSEG , PIMFA , Santander CIB , The IA and UK Finance .
Charlie Geffen , Taskforce Chair , said : “ The direction of travel for shorter settlement cycles is clear . This is a major project that will keep the UK at the forefront of technology in capital markets .
“ The strong and collaborative engagement I have seen from stakeholders during the preparation of this report means that I am confident that the UK has the expertise and commitment to enable the necessary operational changes to take place in 2025 . This will provide the UK with the flexibility to adapt to global developments and secure a smooth transition before the end of 2027 .”
The UK taskforce has faced some hurdles in preparing the recommendations , most notably trouble in finding a consensus on when that ultimate transition date should be . Some members wished to minimise the period of misalignment with the US which moves to T + 1 in May this year , while others wish to align with the EU – for which there is currently no timeframe .
Because of the back and forth , the recommendations have arrived three months later than initially planned .
The European Securities and Markets Authority ( ESMA ) published its report on the feedback received to its call for evidence on shortening the settlement cycle last week , where it received 81 responses from associations .
Despite confirming it will not pursue a leapfrog shift to T + 0 , the regulator only revealed it will continue to engage with the industry and will seek to publish another report before 17 January 2025 .
Commenting on the report AFME ’ s CEO , Adam Farkas , said , “ AFME agrees with , and supports , the conclusion of the report that UK securities markets should adopt a T + 1 settlement cycle , within a reasonable timeframe .
“ The report recommends a coordinated approach across the UK , EU and other European jurisdictions . AFME fully endorses this conclusion , and we further note that the report does not identify any material advantage for UK capital markets to move to T + 1 out of step with regional partners . We therefore call on authorities to adopt a collaborative approach in order to reach a pan-European consensus on timing .
“ We highlight the need for further detailed technical analysis across Europe in order to determine the appropriate implementation date , and the nature and timing of any broader market changes that are necessary to facilitate T + 1 . This analysis should incorporate lessons learned from the US move to T + 1 in May 2024 . We therefore welcome the establishment of the Technical Group and we will continue to share our , and our members ’ wealth of expertise during the next phase of work .”
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