EC Unveils Ambitious Plan for T+1 Migration by 2027: What You Need to Know

EC Unveils Ambitious Plan for T+1 Migration by 2027: What You Need to Know

In a significant move for the European financial markets, the European Securities and Markets Authority (ESMA) has released a report advocating for the transition to a T+1 settlement cycle, which is set to take place on 11 October 2027. This shift aims to enhance efficiency and synchronization across various financial instruments, aligning the EU with countries like the US, Canada, and India, which have already adopted this accelerated settlement process.

Key Developments in the Transition to T+1

The European Commission (EC) has responded to ESMA’s recommendations by proposing targeted amendments to the Central Securities Depositories Regulation (CSDR). This proposal is designed to facilitate the transition and ensure a smooth implementation process.

Timeline for Implementation

  • Date of Transition: 11 October 2027
  • Preparation Period: Market participants will have ample time to develop, test, and agree on processes and standards.
  • Future-Proofing: The proposal allows for potential faster settlements at T+0 while establishing a maximum settlement duration of T+1.

Benefits of Moving to T+1

The transition to a T+1 settlement cycle is expected to bring several advantages:

  • Reduced Lag: Aligning with the UK and Switzerland will minimize costly delays in securities trades.
  • Increased Efficiency: T+1 promotes greater settlement efficiency, which can lead to a more robust capital market.
  • Market Resilience: The changes will enhance the resilience of EU capital markets.
  • Global Alignment: Following the T+1 model will prevent market fragmentation and ensure consistency with global financial markets.

Industry Response

The Association for Financial Markets in Europe (AFME) has expressed support for the EC’s proactive approach. They welcome the regulatory framework that aligns with the anticipated timelines of the UK and Switzerland. AFME has committed to collaborating with the EU T+1 Industry Committee to facilitate a successful transition.

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This strategic move underscores the importance of adapting to evolving market conditions and maintaining competitive parity with global financial hubs. The proposal is now set to be reviewed by the European Parliament and the Council for further approval.

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