Contrary to common consensus, the UK, EU, and Switzerland should transition to T+1 in the autumn of 2026, says the Investment Association (IA). In a recently published position paper on the shortening of the settlement cycle, the organisation laid out the views of its member firms gathered from a survey conducted in July this year.
The paper states that the earlier deadline of autumn 2026 “represents a broad compromise of our membership’s views”. Nevertheless, it acknowledges that “other industry sectors may need a longer time to prepare for the transition, and that the political and regulatory timelines of the UK and Europe may make a 2026 transition challenging”.
Stay aligned
On UK, EU, and Swiss alignment in the transition, the IA stands with popular consensus in recommending that all three territories “transition at the same time”. Additionally, any future changes in the settlement cycle should be “conducted and coordinated globally with the end investor in mind”.
Therefore, if one or more of the three jurisdictions cannot transition before the end of 2027, but can commit to a later timeline before the end of 2025, IA suggests that “the other jurisdiction(s) should move their transition date back to align”.
Should the UK decide to move to T+1 ahead of the EU, a “safe harbour” exemption should be set up for UK traded and settled exchange traded products (ETPs). These should remain on a T+2 cycle until the EU transitions. The same exemption should apply for EU products such as Eurobonds if the EU transitions first.
Sooner, rather than later
The paper concluded that although the UK, EU, and Swiss market infrastructures are more complicated than the US’, “many of the lessons learnt, system upgrades and process changes that firms undertook for the US transition can be applied in a UK, EU, and Swiss context, making T+1 transition achievable by autumn 2026”. Even if transition can only take place at a later date, it should be one that is “before the end of 2027”.