Giovanni Sabatini interviewed: View October 2027 as tomorrow morning

INTERVIEW | Don’t expect a fix. Over Europe’s T+1 process, every market participant must get started immediately, and their self-assessment must challenge their full business strategies. While the speed of Europe’s alignment progress has stunned the industry, coordinated within the EU and European Economic Area by Giovanni Sabatini, he downplays his phase as “the easy part of the journey”. Upon his final report publication, already at the end of this month, he will shift to communication mode, seeking to ensure that everyone properly explores what will be in it for just them. 

“11 October 2027 could seem far away but take into account the effort that will be required, and it is like tomorrow morning,” says Giovanni Sabatini, head of the industry committee within the EU and EEA for the move to a T+1 standard settlement cycle. The shift is scheduled simultaneously with the UK and Switzerland. 

“We have managed to achieve a reasonable set of recommendations. It is ambitious, while at the same time being possible to adhere to. It will require a major effort from all market participants. What is important is that they start now – to understand the issue, assess the impact on their systems and procedures, start deciding how they want to implement our recommendation, then allocate the financial resources and time that they will need to invest.”

Don’t miss the chance to meet Giovanni in Stockholm during the 3–4 September PostTrade 360° 2025 conference – register today! He will be a panellist on this main hall session about where Europe’s T+1 will go. You take part free of charge (except if you are marketing a vendor that is not a sponsor).

Adaptations must be uniquely tailored to each firm, but overall, the reduction of settlement preparation time, to sometimes as little as two hours, removes the option to tackle spikes or issues by allocating more staff. Only the appropriate and sufficient technological systems will be able to provide the bandwidth and predictability needed. 

Investment will be necessary

“T+1 means automation, automation, automation,” says Sabatini. “And this will require substantial investment.”

The imperative to automate is also driving the need for standardisation, across data formats and processes used throughout the industry, in the EU’s 27 countries and beyond. This goes not least for the matching and settlement instructions. 

“The UK Accelerated Settlement Taskforce has recommended the standards of the Financial Markets Standards Board (FMSB), which we think are a good basis. But when you consider the EU’s multiple CSDs and the fragmented markets, we will probably need some tailoring. This is something we will further discuss, to achieve what we call the standards for EU markets.”

While his overall picture breathes opportunity for the industry, under the homogenisation of practices that could result, Sabatini does not gloss over the squeeze that many actors will be feeling. Asset management has been increasingly fee-pressed and consolidated over decades, many banks and trading firms having seen more glamorous days, too. Can small players afford the upcoming system investments? 

“For sure, smaller market participants have to make a strategic decision: should we remain in business or exit. They may not have the scale to make this investment profitable and this will probably drive some more consolidation.”

All firms must ask themselves which capabilities they have or must get. Those relying on outsourcing services must extend their sceptical inquiry to include the capabilities of their providers. 

Starting from reality

Some have pointed to Europe’s financial market problems as too deep to be addressed by just a shortened settlement cycle. Mario Draghi’s broad competitiveness report last year suggested setting up a consolidated CSD and CCP, in the style of US-based DTCC, others have proposed consolidating currently national market regulation and supervision. Yet others have pointed to the possibility of jumping straight to T+0 on the back of distributed ledger technology. Giovanni Sabatini does not go into debate on the suggestions as such but rules out that his project’s rapid progress would have been possible unless it started from today’s reality rather than from still imaginary ideal states. Running from where we stand is challenging enough. 

“The transition in the EU, with 27 jurisdictions, is a much more complex process than in the US or the UK. We have the Central Securities Depositories Regulation (CSDR) but a lot of national specificities remain in the legislative and regulatory framework.”

Adhere or explain

Against the background of the complexity, and the fact that the industry committee does not have regulatory power itself, it chose the approach of “adhere or explain” – intended to offer a balance between pushing for compliance and allowing for deviation where there is good reason. 

The starting stretch was shortened by previous work including an industry report last autumn and by the pioneering efforts of the UK’s Accelerated Settlement Taskforce. A broadly prevailing sense that Europe’s financial markets may be lagging, or staggering, compared with the US and other geographies may have helped motivate stakeholders to take on the challenge. And such a notion could have been exacerbated also by chilly geopolitical winds lately. In any case, the backing of the industry for a rapid shift to T+1 would immediately prove strong. 

“… and by our conclave on 28 May, there was white smoke,” jokes Sabatini, a native of Rome, metaphorically referencing the near-simultaneous process of the Vatican to appoint the next pope. 

“This meant that we are on track to deliver the final high-level road map to T+1 for EU and EEA markets by 30 June. I think this has been a quite remarkable achievement, considering that we have been working only for five months.”

“What has helped us in the industry committee has been a collective awareness that once we decided to move to T+1, we had to do this in a coordinated way with the UK and Switzerland. Not being able to move together on the 11 October 2027 would simply cause additional costs, a potential loss of liquidity, and a potential loss of competitiveness of the European markets. I think this awareness triggered a run to deliver,” says Sabatini – also noting a shared sense, across the various workstream groups, that their work feeds into the broader strategic vision for capital-market integration and competitiveness that is fronted by the European Commission. 

With the report printed, continued discussions will help refine the recommendations into more prescriptive formats – a “rule book”, suggesting best practices to implement them. For the rest of 2025, Giovanni Sabatini foresees that he will focus on “communication strategy” as much as on the recommendations themselves. 

“My target is to be sure that, by the end of December, we have been able to reach all European market participants. Whether they like our recommendations or not, at least they should have read them and understood what they imply for them.”

Meet your new nightly schedule

So, what aspect is most remarkable?

“I would say our agreement on the new operational timetable. While in the current environment you have almost 24 or 25 hours to ensure that all the instruction are matched and then input into the settlement system, in the T+1 environment this time lag is shortened to a few hours, or even less if you consider trading venues that have extended trading hours up to 10 o’clock in the evening.”

By today’s setup, with the EU’s Target2Securities (T2S) service, the settlement day begins at 20:00, causing overlap with venues that host trade until 22:00. 

“So, a critical issue was how to ensure that settlement instructions from trades executed until 22:00 will flow into the netting process at the central counterparty, then have the report of the netting sent to clearing members and settlement agents, have them review the report and get the allocation of cash and securities in order – and then, at the end, input the settlement instruction in the first night cycle of the European Central Bank’s T2S.”

Sabatini’s committee proposes a first night cycle to start at 00:00, a second at 02:00, with real-time gross settlement (RTGS) then firing in the morning. The decision lies with the ECB. 

One open question relates to repo transactions. 

“Repo traders have highlighted that in the T+1 environment, most of the repo will be settled on T+0. And so, they are recommending an additional netting settlement cycle during the daylight. This is quite problematic, for the time being, also in terms of implementation, because an additional netting cycle during the day would interact with the functioning of the real time gross settlement, with other procedures managed by the ECB (Target, Tips, ECMS …). So, this is an area where we will not deliver a specific recommendation, but that we will still discuss with the ECB: how to ensure that there will be optimisation of the process to facilitate settlement of repo transactions in the early hours of T+1.”

“Another issue has been the need for extending the cut off time for delivery-versus-payment (DvP) transactions from the current 4 o‘clock to 5 o‘clock. But again, this is an area where we need better qualitative and quantitative information to make a final judgement whether this is needed or not.”

These being “in a nutshell, the really critical issues”, the list of additional elements requiring attention could be made much longer – one being the room for the money exchange transactions when a securities buyer holds money in one currency but needs to settle a trade with another one. 

“We need to ensure that all FX transactions will be executed in a way that is compatible with the new operational timetable and the CLS cutoff times, and this adds complexity.”

Not in position to chase

As for the role of his industry committee, he expects it to transfer into a more supportive role, as supervisory authorities and regulators must step in to provide the incentives towards individual firms. 

“By the end of the year we should probably reconsider the term of reference. We can provide expertise to market participants, help better understand the technicalities for adhering to our recommendation, and perform surveys to check the progress overall. But we are not a supervisor, we cannot go and check with all the relevant institutions ‘what is your plan’ or tell them ‘you are too slow’. We will have to find the right balance between the role of the industry and the role of the public authorities.”