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The UK government has given the greenlight to move the country to a T+1 settlement cycle following a report from the Accelerated Settlement Taskforce (AST).
The report is a key step forward in supporting the competitiveness and modernisation of the UK financial markets, according to HM Treasury, and the government has accepted all of its recommendations.
Charlie Geffen was tasked with chairing AST in December 2022, examining the potential for the UK to move to faster settlement of securities trades and in particular, whether the UK could move to a T+1 standard settlement period.
Geffen’s report highlights how a move to T+1 could improve market resilience, bring cost savings for investors and reduce the risks associated with having an extended period between trading and settlement.
HM Treasury says it needs to consider how harmonised settlement cycles across major financial centres could be beneficial for market participants.
The Taskforce recommends that the UK should aim to move to T+1 no later than the end of 2027. The government indicates that it “fully endorses” this position as firms require sufficient time to prepare for the transition, while ensuring the government maintains momentum for this project.
As part of the report recommendations, AST proposes that the government engage with other European jurisdictions to explore whether coordinating a move to T+1 is possible.
HM Treasury adds: “If this can be done within a suitable time frame, we could align our timetable for the transition to T+1. The government looks forward to engaging with our European partners — in particular the EU and Switzerland — to see if we can align our work on this.”
Following this announcement, the government has also established a Technical Group to take the implementation of the UK move to T+1 forward.
This group will be chaired by Andrew Douglas and will be composed of industry experts, who will be responsible for developing the technical and operational changes necessary for the UK to transition to T+1 and a framework for how these should be implemented.
The group will also determine the appropriate timing for these changes — which should be a date in 2025 — and the overall go-live date for T+1.
The Association for Financial Markets in Europe (AFME) welcomes the move from the HM Treasury and the recommendations from the Taskforce report.
Commenting on the announcement, AFME’s CEO Adam Farkas says: “AFME agrees with, and supports, the conclusion of the report that UK securities markets should adopt a T+1 settlement cycle, within a reasonable timeframe.
“The report recommends a coordinated approach across the UK, EU and other European jurisdictions. AFME fully endorses this conclusion, and we note that the report does not identify any material advantage for UK capital markets to move to T+1 out of step with regional partners. We therefore call on authorities to adopt a collaborative approach to reach a pan-European consensus on timing.”
Farkas highlights the need for further detailed technical analysis across Europe to determine the appropriate implementation date, and the nature and timing of any broader market changes that are necessary to facilitate T+1.
He adds that this analysis should incorporate lessons learned from the US move to T+1 in May 2024.
