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As Europe’s capital markets industry braces for the transition to T+1 settlement cycles, the UK Accelerated Settlement Taskforce (AST) has unveiled its final plan, setting the stage for a significant shift in market operations.
With the implementation date set for October 11, 2027, there is a mandate covering all market participants trading in UK/EU and Swiss securities to begin preparing for T+1 with a clear focus on what is being described as behavioural changes aimed at the need for automation.
Given only 53% of market participants in the UK report to having an awareness for T+1, the journey ahead is challenging yet promising.
Learning from North America's Experience
The transition to T+1 in North America was met with apprehension, yet it has proven to be at least a partial success story. Key performance indicators such as decreased fail rates, improved affirmation rates, and more efficient funding highlighted the readiness for this shift. The collaborative efforts of the SEC, SIFMA, and DTCC, coupled with clear deadlines and proactive preparation, were instrumental in this achievement.
However, the journey was not without its hurdles. Once the initial period of the transition passed, it has become increasingly difficult for firms to maintain low fail rates. While larger broker-dealers and custodians thrived, thanks to their investments in automation and robust operating models, asset managers and institutional investors faced greater challenges due to less integration, higher adoption costs, and legacy systems. A recent survey revealed that post-implementation, North American participants experienced a 16-18% increase in staffing costs, primarily due to lack of automation and process redesign. This disparity underscores the varying degrees of readiness across the industry.
The Road Ahead for Europe and Asia
As key European and Asian jurisdictions prepare for their own T+1 transitions, they must navigate a more complex landscape. Extended working hours to meet custodian deadlines, delays in reconciliation due to legacy processes, and the need for real-time data transfer are just a few of the challenges that lie ahead. The AST’s UK Implementation Plan emphasizes that automation, not headcount, is the key to overcoming these obstacles.
The Power of Automation
Automation is not just a buzzword; it is the cornerstone of a successful T+1 transition. The AST Taskforce Chair, Andrew Douglas, has highlighted the critical need for investment in automation.
By addressing automation gaps now, firms can ensure a smoother transition and reap the benefits of improved throughput times and a reduction in settlement fails.
Begin Your Automation Journey Now
Although T+1 will not go into effect until 2027, firms must “action this day,” and begin automating their processes now to ensure compliance. The AST’s plan provides detailed guidance in its Code of Conduct (UK-TCC) on recommended actions and strategies to help firms prepare for a smooth transition. For 2025, the AST recommends that firms review and assess internal processes against the UK-TCC, establish a project plan to address the T+1 transition, and initiate behavioural changes and automation projects.
The AST outlines the expected behaviours of all market participants, which include a commitment to compliance, automation, and a call to “action this day.” Behavioural change, as defined by the AST, means taking a proactive approach to automation and implementation. Following the North American T+1 transition, wherein automation became reactionary to meet the deadline, the UK is encouraging firms to address automation, now. This echoes the drive for automation that we at Xceptor have highlighted to market participants, and the role of future-proofing for T+1.
As a first step, firms must act today to understand where the gaps in their current processes lie, and what support they will need from external automation providers. Furthermore, T+1 is not a surprise, and firms should budget now to ensure they can meet the 2027 deadline.
Moving Forward
The implementation of T+1 in North America offers valuable lessons for other regions. However, the decentralized nature of financial ecosystems in the UK, Europe, and Asia, along with larger CSD networks and multiple currencies, adds layers of complexity. Achieving operational efficiency through increased automation will be critical to overcoming these challenges.
By prioritizing automation in key areas, the industry can drive down costs, reduce risks, and position itself for long-term success in the T+1 era. As the global financial landscape continues to evolve, the lessons from North America's T+1 transition will undoubtedly inform and guide the way forward for other markets. Firms would be wise to follow the guidance on expected behaviours and deadlines laid out by the AST as they prepare for a seamless T+1 transition.
To learn more about how firms are automating these processes, schedule a session with our team.
