A collection of global industry trade groups has come out in favour of a call for Europe to join Canada and the U.S. in shortening the securities settlement cycle.
The idea is outlined in a report from the U.K.’s Accelerated Settlement Taskforce, which began a review of the idea in January 2023. The taskforce recommended the U.K. commit to embracing the “T+1” clearing and settlement cycle, and that it make this move by the end of 2027 at the latest.
The Canadian markets are set to adopt T+1 on May 27, with the U.S. markets making the move on May 28.
On Tuesday, a collection of industry trade groups came out in support of the U.K. recommendations, particularly its call for a coordinated move to a shorter settlement cycle across Europe.
The group — which includes the Alternative Investment Management Association (AIMA), the Global Financial Markets Association (GFMA), and groups representing the fund industry, banks, exchanges, custodians and other market players — issued a statement calling for cooperation in this area by policymakers in the U.K., Europe, and Switzerland.
“Our shared ambition is for a low-cost, efficient, safe, resilient and integrated post-trade environment which supports globally competitive European securities markets, with high levels of automation and standardization,” the group said in a statement.
The group also pledged to undertake its own analysis of how best to transition to T+1 in Europe, and said that it will develop a proposed roadmap for adoption of T+1, and a potential timeline, “that would allow enough time for firms to assess the changes they need to undertake, for the industry to conduct comprehensive testing, and for authorities to make the necessary regulatory changes.”
“This analysis will also incorporate lessons learned from the North American migration to T+1 in May 2024,” it said.
In its report, the taskforce also called for policymakers in the U.K. and other European jurisdictions to collaborate and consider a possible coordinated move to T+1 in the next several years. And it recommended that the government strike a technical group of industry experts to study the operational changes that will be required to move to T+1 securities settlement, with a view to mandating these changes for the industry in 2025, in preparation for a transition to T+1 in 2027.
In response, the government accepted the taskforce’s recommendations, and appointed a chair of the proposed technical group.
The head of fund industry trade group, ICI Global, Michael Pedroni, issued a statement endorsing the planned move to T+1 in the U.K. Such a move, he said, will “increase efficiency and cost-effectiveness and better serve investors.”
Pedroni echoed the call for European policymakers to engage with each other, and with the U.K., and “commit to an expedited and coordinated implementation timeline.”
“Acting expeditiously will help minimize the duration of misalignment with the North American markets, while providing market participants sufficient time to prepare and implement the transition,” he said.
“We remain committed to supporting the transition to T+1 across major global markets, building on our experience in leading industry efforts to prepare for the North American move,” Pedroni said.