T+1 Settlement – Driving Behavioural and Technological Change in Post-Trade Operations

With the capital markets industry facing constant pressure to streamline operations and reduce costs, the shift towards a T+1 settlement cycle in Europe, including the UK and Switzerland, represents both a formidable challenge and a critical inflection point for post-trade processes. So what are the biggest risks facing firms ahead of this shift? How will legacy systems, fragmented workflows, and behavioural inertia impact readiness? And where should the industry focus its energies? On technology, regulation, cross-market coordination, or something else?

The discussion offered a sharp and pragmatic view of the readiness required to meet the October 2027 deadline for T+1 in the EU, UK and Switzerland, and what the industry must do to get there.

T+1 Is Not Just a Settlement Problem, It’s a Process Problem

Although often framed as a challenge of faster settlement, panellists stressed that T+1 is fundamentally about compressing everything that happens before settlement. From trade matching to client allocations and inventory reconciliation, firms will have significantly less time to get their house in order. One speaker summed it up plainly: “If you shave off that 24 hours and do no work for T+1, you’re literally going to have 30% of your trading activity fall over and not settle on time.”

The experience of the US market offered critical lessons. A key success factor there was the strong emphasis on same-day trade matching, i.e. moving the process upstream to trade date itself. Yet, concerns remain that European market practices still lag in terms of automation and straight-through processing (STP), with too much reliance on manual intervention. As one panellist observed, “If we are not fully STP, I’m a bit worried about how we can compress the post-trade processing time.”

The clear takeaway: T+1 is not simply a technical shift, it is a catalyst for reviewing and redesigning the entire post-trade operating model.

Collective Readiness and the Importance of Market Coordination

Another recurring theme was the interdependence between market participants. No single firm can achieve T+1 compliance in isolation. Success depends on bilateral and multilateral coordination, data standardisation, and aligned operating timelines. “To get a trade match, you need two parties to play together at the same time, at the same speed,” said one participant. “If that doesn’t happen, the trade fails.”

This synchronisation extends beyond firms to infrastructures. The role of common data definitions and message formats – especially between EMS and OMS platforms – was flagged as a priority. Without consistency, the matching process stalls. Equally, the issue of aligning cut-off times across intermediaries, custodians, and settlement venues was seen as critical, particularly for cross-border flows.

Panellists also pointed to the European Commission’s recent legislative proposals and ESMA’s consultation on the CSDR settlement discipline regime as important regulatory signals. Among other things, they reinforce the expectation that trade allocation and confirmation between brokers and clients occur on trade date, an operational step-change for many firms.

FX Execution and Lessons from the U.S.

While concerns around the FX leg of transactions were prominent in early discussions about the US move to T+1, the panel reflected on how those fears were largely unfounded. In practice, the FX market adapted well, thanks to changes in behaviour, such as executing earlier in the day, and infrastructural adjustments like realigning custodian cut-off times to match CLS deadlines.

From a CLS perspective, daily average settlements increased from $6.6 trillion pre-transition to $7.2 trillion by year-end 2023. This surge suggested that not only did the market absorb the timeline compression, but it also became more efficient. “It was a bit of a storm in a teacup from a foreign exchange perspective,” one speaker remarked.

Europe may face even fewer challenges, given its more favourable time zone alignment. The panel was broadly optimistic that FX-related risks will be lower on this side of the Atlantic.

Securities Financing and Inventory Management

The panel also stressed that post-trade efficiency in cash markets depends on the smooth functioning of securities financing, namely repo and securities lending. Yet these areas remain behind the curve in terms of automation. As one participant put it, “Moving the cash market to T+1 effectively means moving securities financing to T+0.”

The ability to manage inventory in near real-time, particularly across custody, trading, and lending platforms, will be crucial. But legacy systems remain a drag. “We’re still running monolithic custody systems from the 1960s and 70s,” one speaker noted, pointing to the need for targeted investment in data infrastructure and system interoperability.

AI and intelligent data extraction were cited as potential enablers, especially in automating negotiation frameworks and improving visibility across books. But panellists were clear-eyed about the effort required: without a stable and efficient securities financing layer, cash market settlement will struggle to keep pace.

Shifting Mindsets, Not Just Systems

Despite the heavy focus on technology, the panel agreed that behavioural change will be the harder – and arguably more important – challenge. Long-established habits around trade affirmation timing, internal processing priorities, and cross-entity coordination must evolve.

Firms will be required to affirm trades closer to execution, streamline communication channels, and collaborate more openly with counterparties. For cross-market transactions, where one leg may still settle on T+2 or T+3, this behavioural discipline becomes even more essential.

In the words of one panellist, “Technology will be a key enabler—but the real challenge is changing the way we work.” And with the October 2027 deadline set, there is little time left for complacency.