T+1 in Europe: The future is faster and more efficient

Accelerating settlement cycles in global financial markets is a transformative event. Moving to T+1 in the United States and Canada in May 2024 introduced a new paradigm which is challenging Europe to adapt to the evolution of the global post-trade landscape.

The implications are wide and wide - ranging for different kinds of actors, from market participants to liquidity providers, and to financial infrastructure players.

Challenges and impacts for Europe

In the Old Continent, a fundamental step in the transition to a T+1 settlement cycle concerns the accelerated adoption of messaging standards and their contents, which will improve harmonized communication between central securities depositories, custodian and market participants. However, there are many challenges that need to be addressed in this sentence.

One of the objectives of the T+1 migration is, in fact, a significant reduction in the post-trade processing window, which will make handling real-time exceptions and automated reconciliation a fundamental priority. The instructions for the confirmation, allocation and settlement of the negotiations will now have to be completed in a few hours, rather than in a one-day period, leaving players with a minimum time to resolve discrepancies. For market participants, the need to adapt to this accelerated timetable is a challenging and significant aspect, both for IT enhancement costs and more generally for post-trade processes.

What needs to change

For now, the allocation and confirmation of negotiations are semi-automated for most of the players. This dependence on manual intervention introduces inefficiencies due to human error or mismatch in the "data enrichment" systems related to settlement instructions resulting in settlement delays.

The transition to T+1 will generate significant impacts on securities lending and repo market, forcing participants to adjust operational flows, collateralisation strategies and liquidity management.

In a T+1 context, multi-listed financial instruments are additional challenges in managing positions, especially for market makers. Non-timely adjustments between different places of settlement increase fail rates by requiring real-time positions and increased reliance on securities lending. In this sense, better access to centralised guarantee pools or repurchase agreements will be central to market makers to efficiently manage their liquidity exposure.

Prepare for change

It should become clear, the T+1 transaction requires multiple implementations to market players. These include the complete automation of operations flows; the adoption of tools for real-time position updates and automatic call time arrangements for securities lending; the development of intraday liquidity pools; the introduction of automatic position realignment mechanisms; the adoption of standardised and synchronised sealed keeping protocols for multi-listed parties including MIC code and place of settlement (PSET). Optimising operational processes, strengthening IT infrastructure, managing their risks and synergies between market players will therefore be crucial to ensure an efficient T+1 switch in Europe. Read more: 2027 and the shift towards T+1 in Europe.

This is why Societe Generale Securities Services has decided to bring the issue at the centre of the debate at the Salone del Risparmio 2025 with a conference aimed at all the players of this fundamental change for the future of the markets of the Old Continent.

Article published in FocusRisparmio in April 2025.