The European Securities and Markets Authority (ESMA) has outlined its roadmap for transitioning the EU to a T+1 settlement cycle, aiming for implementation by 11 October 2027.
To ensure a seamless transition, ESMA’s final report, published Monday, recommends a coordinated EU-wide implementation covering all relevant financial instruments in the fourth quarter of 2027. The regulator stresses the importance of synchronising with other European jurisdictions, and the date is in line with the United Kingdom’s existing plans for a launch there “no later than 31st December 2027”. The proposed EU timeline includes industry readiness by the end of 2026, followed by a testing phase leading up to the October 2027 go-live date.
The Monday publication was scheduled to be followed Tuesday morning by performances at the European settlement industry’s ECSDA Conference, in Brussels, both by EU financial-services commissioner Mairead McGuinness and (in recorded format) by ESMA’s chair Verena Ross.
The move is expected to boost efficiency and resilience in post-trade processes while supporting broader EU market integration goals.
Change and challenges
“Shortening the settlement cycle in the EU will undoubtedly change the way in which markets function today,” says ESMA, “affecting all entities along the transaction and settlement chains, with different impacts depending on the type of stakeholder, the category of transaction and the type of financial instrument.”
While the transition offers clear advantages, ESMA acknowledges challenges. These include revising the Central Securities Depositories Regulation (CSDR) and updating the settlement discipline framework to ensure legal certainty and post-trade process improvements. Harmonisation, standardisation, and modernising infrastructure will require significant investment from market participants.
Regulatory oversight
Given the complexity of EU capital markets, ESMA highlights the need for specific governance mechanisms to oversee the transition. It will collaborate with the European Commission and the European Central Bank to address regulatory and operational requirements.
The authority will continue its work on settlement efficiency rules, focusing on ensuring a smooth migration to T+1 while addressing the legal, operational, and infrastructural changes necessary for the transition.
In its report, ESMA emphasises the potential benefits of the shift, which include improved settlement efficiency, reduced risks, and cost savings from aligning with jurisdictions like the US, which adopted T+1 in May. The transition aligns with the EU’s goals for market integration and the Savings and Investment Union.
