Europe’s Leap to T+1 Settlement: A New Era Begins
Welcome to our inaugural news series on T+1 in the European, Swiss and UK landscape. This is the first of a series of articles we will share on our corporate LinkedIn channel to accompany and prepare you on your journey to T+1. Over the next months, we will provide you with important developments in the context of T+1 and put them into context.
On June 18, 2025, the European Council and Parliament reached a pivotal agreement to shorten the securities settlement cycle from T+2 to T+1, effective October 11, 2027. This move aligns Europe with global markets like the U.S., aiming to reduce operational risk, enhance market harmonization, and lower investment barriers.
Why It Matters
- Time Compression: T+1 drastically reduces the window for post-trade activities, demanding faster, more efficient operations.
- Automation is Critical: Manual processes remain a major obstacle to real-time liquidity management and straight-through processing. Firms must accelerate automation to ensure resilience and meet tighter settlement timelines.
- Settlement Efficiency in Focus: In 2024, €70.43 million/month in penalties were paid due to settlement fails - 71% caused by short positions, 21% by data issues like outdated SSIs.
Kathy Waldie, Head of TARGET Services Governance at Clearstream and Co-Chair of the T+1 Settlement Workstream within the EU Industry Committee states in this context:
"Europe’s move to a T+1 settlement cycle marks a pivotal step toward global market harmonization, aligning with the U.S., Canada, India, China, and others to enhance efficiency, reduce risk, and strengthen its role in an increasingly interconnected financial world. At Clearstream, we are committed to supporting our clients throughout this transition, helping them adapt and thrive in a more efficient and resilient global financial ecosystem."
Lessons from North America
- Early preparation and rigorous testing were key to a smooth transition.
- Europe must follow suit to avoid disruption.
Industry Readiness
- Despite the urgency, 28% of firms haven’t started planning.
- Implementation costs vary widely—from $223K for small firms to $36M for large custodians.
June 30 Milestone: Clearstream and Deutsche Börse Group amongst other market participants contributed to newly released industry recommendations, covering:
- Liquidity Tools: Use of partial settlement, hold/release, and shaping to manage intraday liquidity.
- Same-Day Trade Matching: All pre-settlement steps must be completed on trade date.
- FX Workflow Overhaul: FX processes must adapt to tighter timelines.
The Road Ahead
This transformation is more than a regulatory shift—it’s a strategic leap toward a more resilient, harmonized, and competitive European capital market. Stay tuned as Clearstream and Deutsche Börse Group guide the industry through each milestone.