The European Council (EC) provided an exemption for securities financing transactions (SFTs) from the T+1 settlement cycle requirement because of their “non-standardized nature and the non-standardized settlement periods that may need to be agreed to by the parties to such transactions to achieve their objectives.”
In order to avoid any risks of circumvention of the T+1 settlement cycle requirement, the exemption should only apply if SFTs are documented as single transactions composed of two linked operations, the EC wrote. After further discussions, new rules will apply from 11 October 2027.
Jesus Benito, head of Domestic Custody & TR Ops at SIX, said in emailed commentary: “The Council’s formal backing of the move to T+1 is an important step for Europe in aligning with global post-trade reforms. The decision to exempt securities financing transactions shows an understanding of the complexities in this area, but it also underlines the need for clear coordination to avoid fragmentation.
“With 2027 now in sight, the focus in every respect must be on ensuring the market can adapt in a unified way. It will be crucial for regulators, market participants, and CSDs are to be aligned on the processes for securities lending so settlement efficiency after migrating to T+1 is at least maintained, if not improved.”