A coordinated move to shorten trade-settlement cycles in the U.K., European Union and Swiss markets is a “crucial” step toward enhancing efficiency and bringing global alignment with North America’s process, the Investment Association said.
A paper outlining the U.K. money management trade body’s views on a potential move to a T+1 settlement cycle in the three markets highlighted that global alignment — following the U.S. and Canada’s moves in May — would “foster a more robust financial ecosystem, will increase investor confidence and will ensure that the U.K. and European markets remain competitive and attractive to all investors.”
Such alignment and harmonization of the period of time between trade execution and settlement — currently two days — would reduce trading friction and costs, which the IA said would benefit investors.
The IA made a set of recommendations following engagement with its member firms in July, and called on supervisory bodies and policymakers in the relevant markets to work on a shared timeline regarding moving to a T+1 settlement cycle. The U.K., EU and Switzerland should transition in the fall of 2026, the IA added. Should one or more of the jurisdictions only be able to move at a later date, but before the end of 2027, and can commit to that date before the end of 2025, “the other jurisdiction(s) should move their transition date back to align,” the IA said.
If the U.K. were to move to T+1 ahead of Europe, there needs to be a “safe-harbor” exemption on U.K.-traded and settled exchange-traded products — which includes ETFs. Those products should remain on a T+2 secondary market settlement cycle until the EU moves to a shorter settlement cycle, the IA said. In the case of the EU moving first, a similar safe-harbor should apply, and also to Eurobonds.
The IA, in a news release, welcomed a statement from the European Securities and Markets Authority, the European Commission and the European Central Bank outlining its commitment to moving to T+1. In a joint statement, the three entities said a coordinated process across Europe is “desirable,” adding that the EC’s directorate-general for financial stability, financial services and capital markets union, the ECB’s directorate-general for market infrastructure and payments, and ESMA “consider it necessary to accelerate every aspect of the technical work needed to pave the way to any future move to T+1 in the EU.”
“European alignment on settlement cycles will bring these jurisdictions together in step with the U.S., enhancing market efficiency, reducing frictions across pan-European and global products and portfolios, and decreasing funding costs,” said Alex Chow, investment operations policy lead at the IA, in the news release. “Driving greater global alignment on settlement cycles will foster a more robust financial ecosystem, increase investor confidence and improve the competitiveness of U.K. and European capital markets.”
The IA is part of the U.K.’s Accelerated Settlement Taskforce and is also a steering committee member of a related technical group.
The paper is available to download on the IA's website.
