T+1 is inevitable – and the question for the UK is not whether it should transition to T+1, but how it should do so, says the country’s Accelerated Settlement Taskforce. In a recently published report, the group also recommends that the UK, EU, and other European jurisdictions “align their moves to T+1”, but if that cannot be achieved in “a suitable timescale”, the UK “should proceed in any event”.
The taskforce suggests a two-phase approach to the transition to T+1. The first phase involves operational changes that should be mandated by a date in 2025. The second is the actual transition set for a date before the end of 2027.
Perfect timing
A number of factors have been considered in the taskforce’s suggestion for the timing of the phases. It notes the general consensus that implementing the necessary changes is a two-year project – “one year for planning and one year for investment and implementation”. The report references the US’ transition, where the Securities and Exchange Commission (SEC) gave the industry 15 months’ formal notice for T+1 transition. Another factor is giving the UK time to learn lessons from the US move.
The taskforce recommends the government to “immediately establish a technical group comprising operational and market experts” to guide the UK’s shift to T+1. T+0 or atomic settlement should not be considered until after the transition to T+1 has taken place.
Stronger together
“If the EU or other European jurisdictions commit to a transition date to T+1, the UK should consider whether it wishes to align with the timeline,” writes the report. However, should there be difficulties aligning with the bloc and other European territories, the UK should go ahead on its own.
The Association for Financial Markets in Europe (AFME) has indicated its agreement with the report and its conclusion. It emphasises the need for a “collaborative approach in order to reach a pan-European consensus on timing”, noting that the taskforce’s analysis “does not identify any material advantage for UK capital markets to move to T+1 out of step with regional partners”.