UK ‘T+1’ migration date crystallised in taskforce recommendation

The recommendation was contained in a recent report published by the Accelerated Settlement Taskforce (AST). The taskforce previously recommended that the move to a T+1 model happen no later than the end of 2027 – a recommendation the last UK government endorsed last year – but its latest report provides a firmer date proposal, the rationale behind it, as well as a detailed implementation plan.

Currently, certain transactions in transferable securities executed on trading venues have a settlement date of no later than the second business day after the trading takes place. This ‘T+2’ model has been in operation in the UK as well as in the EU and Switzerland for more than a decade. However, there is growing pressure on policymakers and regulators to require ‘next business day’ settlement to maintain European competitiveness, after the US, Canada, and Mexico moved to the T+1 model in May 2024.

In its latest report, the AST said it had concluded that 11 October 2027 would be “the optimal date for the first day of trading for T+1 settlement in the UK”. The recommendation takes into account a variety of factors, including the need to avoid a migration date that coincides with “periods of high activity where resourcing could be problematic”, such as calendar year-end, public holidays, dividend season, and index rebalance days. It said the government should confirm the date and amend the UK Central Securities Depositories Regulation accordingly.

The government has said it welcomes the AST’s report and will “set out its response shortly”.

The AST report also contains a series of recommendations for market participants and financial markets infrastructure operators. Investment fund managers are encouraged, for example, to review their internal processes to “identify required changes and automation solutions for all critical and highly recommended actions in settlement, static data, corporate actions, SFT and FX” in light of the UK T+1 code of conduct that the taskforce has developed, as well as develop a project plan to meet their “T+1 transition needs”. The firms are further advised to comply with T+1 requirements earlier than the recommended end dates, if they can.

“Firms do not have to wait until 11th October 2027 to comply with T+1 settlement cycle requirements,” the taskforce said.

The UK taskforce’s recommendation that the UK move forward with an 11 October 2027 migration date aligns with a recommendation made by the European Securities and Markets Authority (ESMA) last November in respect of the EU’s planned move to a T+1 settlement cycle – it also identified 11 October 2027 as the preferred migration date.

Regarding potential alignment with the EU, and Switzerland too, on the issue of T+1 migration, the AST said that “a single implementation event has been and remains a highly desirable outcome primarily to reduce the costs and risks associated with multiple potentially uncoordinated implementations”. However, it suggested that the UK should go it alone with the plans for 11 October 2027 if the EU and Swiss eventually differ.

“The ESMA announcement on 18th November 2024 that it also proposes Monday 11th October 2027 as the EU implementation date was warmly welcomed and we look forward to working with colleagues in the EU to deliver a harmonised implementation plan, noting that the relevant implementation date is subject to confirmation by the UK government or the European Commission,” the AST said.

“This implementation plan [detailed in the AST’s report] maintains the UK commitment to support a joint UK/EU/CH implementation whilst confirming that the UK should implement T+1 on Monday 11th October 2027 to ensure that we derive the benefits of T+1 settlement as soon as possible. This includes aligning with global market practice to reduce the cost and broader impact of misalignment with those jurisdictions that have already implemented T+1, as well as to provide the increased agility needed to respond to market events and benefit from such improvements as the reduced margin requirements observed in other T+1 markets,” it said.