This is how T+1 could consolidate European settlement volumes

DEEP LOOK | The US move to T+1 settlement in 2024 offers many lessons for firms in Europe looking to manage their own switch to a shorter settlement cycle in 2027 but there are also major contrasts between the two regions. Get on top of the detail, with PostTrade 360° contributor Aaron Woolner – and don’t be surprised if settlement activity gets more concentrated soon.

Euronext Securities’ Alessio Mottola and Cleastream Banking’s Dirk Loscher are both among the speakers of the 1,500-delegate PostTrade 360° 2025 event, on 3–4 September – with sessions here, here and here. As a post-trade operations pro, read more and pick up your free ticket here if you haven’t and join in Stockholm!

Not only does the US have a single currency and central bank, it also has one effective timezone and CSD – the DTCC. Europe is different. The proposed switch to T+1 in October 2027 involves the now 27 strong EU, plus Norway, Iceland, Switzerland, and the UK and it will mean changes happening at all of the region’s 31 CSDs, across three time zones. 

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According to Alessio Mottola, CEO of Euronext Securities Milan, this means there will be greater standardisation of market practices and consolidation of European settlement volumes as a result. 

“The move to T+1 will be a great catalyst for the harmonisation of post-trade market practices in Europe,” Mottola says. 

“We need to differentiate between the concentration that you have today and consolidation that we’re going to see tomorrow.”

Four groups share 90 per cent

“Today in Europe there is a concentration of CSDs with the big four groups accounting for 90% of settlement volumes, but even these volumes are not integrated,” he adds. 

Euronext is looking to increase interoperability by settling all trades via a central CSD at Euronext Securities in Milan. This process will start with settling equity and ETF trades from the Amsterdam, Brussels, and Paris markets by September 2026. 

Mottola says centralising settlement will enable the firm to better deal with cross border trading issues such as different tax codes and managing corporate actions. 

Euronext isn’t the only European CSD looking to integrate its settlement volumes. Dirk Loscher, CEO of Clearstream Banking, and Head of Custody and Investor Solutions for the firm’s securities services operations, says the firm is looking to centralise settlement in a different way.

“Clearstream has invested heavily into our pan-European CSD and now we see that clients are really seriously considering using a solution which allows them to have one account which is linked to all the other T2S CSDs, instead of via each CSD.

Because we closely link the ICSD and the local CSD, we can also offer a full range of foreign currencies in the German market. And a lot of clients are actively using that today already,” Loscher says.

Consolidation – not a given

But not everyone is convinced that T+1 will inevitably lead to greater centralisation of settlement activity.  

Gareth Jones, Head of Product Management Settlement and Cash at Euroclear, says he expects market players to assess their operations in the run-up to T+1 but issues like automating flows pose a bigger challenge than cross border settlement. 

“I don’t see there will be consolidation in post-trade infrastructure as a result of T+1, I expect that firms will respond by reviewing their operations and set-up and take a look at what the best model for operating in Europe is. 

It’s possible that some people will look to consolidate business in certain areas, or it may be that everyone has their own challenges – solving automation and STP are the big issues from my perspective,” Jones says. 

Likewise, Europe will still have a unique post-trade ecosystem, even if CSD integration does occur, says Silvia Sancin, Senior Custody Solutions Manager at BNP Paribas. 

“The resulting structure of different CSDs and currencies will remain a peculiarity of the EU. We expect complexity in the EU to be further reduced but not eliminated as part of the EU framework T+1,” she says. 

T2S has contributed

Mottola says that good progress with integrating European settlement volumes has already been made, he points to the 2015 introduction of  ECB’s T2S settlement system which he says has led to greater harmonisation between its 23 member countries. 

“T2S markets have embraced the journey of harmonisation and it means there is already one settlement system in use in Europe which has been in place for 10 years,” Mottola says.

The CEO adds that the process of harmonisation will accelerate as the EU’s Central Security Depositories Regulation is overhauled to meet the requirements of T+1. 

On 25 July ESMA released its final report on penalties relating to settlement failure and issues like operating times and other practices will be addressed by the regulator between now and October 2027.  

Mottola also expects smaller European non-T2S markets such as Cyprus, Armenia, and the Czech Republic, will ultimately gravitate to T2S standards as its becomes best market best practice in the region.

Loscher says cross border volumes since T2S launched have been low and as a result T+1 will impact the firm’s two CSDs — Clearstream Banking in Germany and an ICSD based in Luxembourg — differently. 

“Unfortunately, very few cross-border transactions take place so far. T2S is basically a roof, and below it you still have France, Italy, Germany, Austria, more or less like it used to be. That was not the idea of T2S,” Loscher says.

Next, the one stop shop?

Loscher says Clearstream’s pan-European CSD approach is about offering optionality to the market, in contrast with Euronext’s decision to centralise settlement in Milan which will require end users to invest onshore in Italy. 

However, Mottola is confident that Euronext’s move will be welcomed by its end users because of the potential cost savings from centralised settlement which can then be passed onto to end users via lower fees. 

“A common network of CSDs which clients can access markets via a single membership removes all market fragmentation issues. A one stop shop makes it possible to standardise fees. Consolidating CSDs is about making post-trade more cost effective,” Mottola says. 

Euronext and Clearstream may have different approaches to the issue of increasing cross border settlement volumes in Europe but they share a belief that a private sector solution is the way for this to happen. 

Some exchanges “just tourist attractions”

Adrian Whelan, Managing Director and Global Head of Market Intelligence for Investor Services at BBH has a different take. 

He says not only should there be consolidation among Europe’s CSDs but authorities should take the lead on this process in order to accelerate EU capital market integration — and create a European settlement ecosystem similar to the US. 

“There’s some European stock exchanges that are just tourist attractions that are only there because politicians want to have one. They’re so likely traded the securities might as well settle in a CSD elsewhere. 

The international CSD model is more efficient than localised CSD, and local markets, and if Europe wants to be competitive, it needs to force consolidation of CSDs into something closer to the DTCC model,” Whelan says. 

But Francisco Béjar, Head of CSD Services at SIX, the final member of the big four European settlement groups, says that it’s too simplistic to think a single DTCC-style CSD is the answer to European financial markets’ lack of integration. 

“The problem of market fragmentation in Europe isn’t the result of too many CSDs. It’s because there are different capital market laws in each country. We have different insolvency laws, securities and fiscal laws across Europe — these are the real complexities of Europe,” Béjar says.