The UK is set to transition to a T+1 securities settlement cycle by 11 October 2027, a move aimed at reducing risk and improving market efficiency. Speaking at the UK Accelerated Settlement Market Event hosted by KPMG, Sasha Mills, Executive Director for Financial Market Infrastructure at the Bank of England, stressed the importance of industry-wide preparation for the shift.
“A shorter settlement cycle supports financial stability by reducing the risks faced by market participants and central counterparties,” Mills stated, highlighting that the change is expected to free up approximately £1 billion in margin held by central counterparties (CCPs), allowing firms to use capital more efficiently.
Implementation challenges
While the benefits of T+1 are clear, Mills acknowledged that the transition will not be without difficulties, particularly for firms operating across multiple time zones. She also noted that moving to T+1 is not without challenges, particularly for firms that operate across multiple time zones.
To support the transition, the Accelerated Settlement Taskforce has developed a roadmap urging Financial Market Infrastructures (FMIs) to review and update their systems, policies, and procedures. The Bank of England expects FMIs to prioritise operational resilience and ensure settlement processes are standardised and automated to minimise disruptions. Mills added that the move to T+1 will require significant changes to systems and processes across the industry.
Global coordination efforts
The UK aims to align its shift to T+1 with other major financial hubs, including the European Union and Switzerland, which are also expected to make the transition on 11 October 2027. By synchronising the transition, regulators hope to prevent cross-border settlement mismatches and improve efficiency for firms operating across multiple jurisdictions.
Call to action
The Bank of England is urging all stakeholders, including FMIs, brokers, and investors, to actively engage in the transition process. Mills stressed the importance of early preparation big saying that early and proactive engagement from all market participants is essential to ensure a successful transition to T+1. Firms are encouraged to develop detailed project plans, allocate necessary resources, and test system changes well in advance of the deadline to avoid disruptions.
