News Story: Capital markets

On 28 March 2024, HM Treasury published Report: Accelerated Settlement Taskforce, which recommends that the UK should commit to shortening the settlement cycle for securities trading on its markets to T+1 by 31 December 2027. The Taskforce was launched in December 2022 as part of the government's package of Edinburgh Reforms to examine the potential for the UK to move to faster settlement of financial trades from the current T+2 regime (see FC Feature 9 December 2022).

The Taskforce highlights that there is clear consensus that the UK should transition to a T+1 settlement cycle to maintain its international competitiveness, having followed a T+2 period since 2014. US markets will operate on a T+1 basis from 28 May 2024 and ESMA is currently considering proposals to reduce the EU cycle from T+2, with a final report expected before January 2025 (ESMA Press Release). In its report, the Taskforce identifies the challenges and risks of a move to T+1 and how these might be mitigated. It makes a series of recommendations to the government regarding the timescale and phasing of the transition to a T+1 settlement cycle by 31 December 2027, including those set out below.

• An Accelerated Settlement Technical Group should be formed immediately to identify and suggest solutions to the technical and operating challenges of moving to a T+1 settlement cycle, which will require considerably more change than the move to T+2 in 2014.
• The Technical Group should determine the timetable for the UK's overall transition to T+1. The Taskforce recommends a two-phased approach to the process, with operational changes taking place during 2025 ahead of migration to help the market adjust to the new practices and standards required in a T+1 environment. These changes should be mandated from a date in 2025 selected by the Group. The specific date for the move to T+1 will be confirmed when the Group formally reports to the government with its findings and recommendations at the end of 2024.
• The UK should engage with the EU and other European jurisdictions to explore opportunities to align timeframes for adoption of T+1 in their markets.
• A move to T+0 or atomic settlement should not take place until after the move to T+1.

The government has accepted the Taskforce's recommendations in full. The Technical Group of industry experts has been set up to analyse the issues identified in the report and establish common processes and solutions to ensure a smooth transition to T+1 by 31 December 2027 (Government Response and Terms of Reference: Accelerated Settlement Technical Group).

First published on the Corporate News Service on 2 April 2024.

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