The European Commission (EC) has proposed to shorten the settlement period for EU transactions in transferable securities from two days to one.
“Having carefully considered the recommendations in the European Securities and Markets Authorities’ (ESMA) report in cooperation with the European System of Central Banks (ESCB) and the stakeholder input, the Commission is proposing a targeted amendment to the Central Securities Depositories Regulation (CSDR),” according to an EC statement.
The proposal sets 11 October 2027 as the appropriate date for the transition to T+1 settlement. This timeline will give market participants sufficient time to develop, test and agree processes and standards to ensure an orderly and successful introduction of T+1 on EU capital markets. The proposal is also future proof, setting a maximum duration for the settlement cycle (T+1) while allowing market participants to settle their transactions faster, at T+0.
Maria Luís Albuquerque, commissioner for Financial Services and the Savings and Investments Union, said in a statement: “At international level, the direction of travel towards a T+1 settlement cycle is very clear. I am determined to ensure that the EU stays dynamic in this important market area. T+1 will bring further concrete benefits for the SIU and will contribute to the competitiveness of EU capital markets. Our proposal will reduce costs, increase efficiency, and improve liquidity, as called for by our industry. We will also strive to coordinate with other European countries intending to move to T+1, in particular the United Kingdom and Switzerland, given the close links between our capital markets.”
The Association for Financial Markets in Europe (AFME) said in an emailed statement: “We welcome the Commission’s prompt action to provide a regulatory basis for the move to T+1, and that the date of application is aligned with the expected timeline of the UK and Switzerland. AFME will continue to support the EU T+1 Industry Committee to lead the successful implementation of the change.”
Jesus Benito, head of Domestic Custody & TR Ops at SIX, said in emailed commentary: “Now that the Commission has rubber-stamped the shift to T+1, attention will now turn to how market participants can work together to ensure a smooth and orderly transition.
“We are already seeing progress, with some trades settling on a T+1 basis in certain EU markets — for example, in Spain, where the first trades of the Cox ABG Group SA IPO settled on a T+1 basis.
“However, there is still much more to do, and it is essential that all relevant market regulators, market participants, and market infrastructure providers collaborate effectively to navigate the fragmented market environment in Europe in the run up to the October 2027 switchover (pending approval from the European Parliament and EU member states).”
Daniel Carpenter, CEO of Meritsoft, a Cognizant company, said in emailed commentary: “October 2027 might seem like a long way off, but from a planning perspective it’s as good as tomorrow. While the US T+1 implementation has so far gone to plan, Europe is a different situation altogether and will take a lot more planning to ensure it goes smoothly across the EU, UK and Switzerland. Budget allocation to upgrade systems to handle shorter settlement times and the expected increase in settlement fails should already be underway in order to make the October 2027 implementation. This allows decisions about systems update projects to be made in 2025, 2026 to be used as a year to implement new systems and software, and 2027 can be used to test final preparations in advance of the deadline.”