T+1 Accelerated Settlement -UK Implementation Plan Overview
Kishore Kumar R.
Capital Markets Advisory and Regulatory Change Leader, Qualified Independent Director
The UK T+1 Accelerated Settlement Taskforce (AST) publishes final implementation plan for the UK’s transition from T+2 to T+1 securities settlement. AST confirms that 11 October 2027 will be the first trading date in UK cash equities for?settlement?on a?T+1?cycle.
What is the significance of the October 2027 date?
1. Optimal Timing:
? ?- The date, Monday 11th October 2027, was selected to avoid periods of high activity where resourcing could be problematic, such as calendar year-end, index rebalance days, the main corporate action dividend season (April-June), futures and options annual expiry dates, and UK and major global market public holidays.
2. Harmonisation:
? ?- This date aims to harmonise the UK’s transition to a T+1 settlement cycle with other major capital markets, including the EU and Switzerland, to reduce the costs and risks associated with multiple uncoordinated implementations.
3. Regulatory Alignment:
? ?- The date allows sufficient time for necessary amendments to the UK Central Securities Depositories Regulation (CSDR) and for Market Participants to prepare and implement the required changes.
4. Market Readiness:
? ?- The timeline provides Market Participants, FMIs, and public authorities with a clear schedule to review, update, and test their systems and processes to ensure a smooth transition to T+1.
Overall, the October 2027 date is strategically chosen to facilitate a coordinated and efficient transition to the T+1 settlement cycle, aligning the UK with global market practices and minimising operational disruptions.
What are the key Deadlines?
- By 31st December 2025:
? - Complete the review of FMI (financial market infrastructure) systems and processes.
? - Define and publish a target market level settlement efficiency rate.
- By 31st December 2026:
? - Complete the implementation of critical actions such as allocation and confirmation processing, settlement instruction submissions, and updating policies & procedures.
? - Implement highly recommended actions to enhance settlement efficiency.
- By 11th October 2027:
? - Ensure all trading parties comply with T+1 obligations.
? - Complete the implementation of remaining T+1 actions and test full T+1 capability.
What exemptions exist for the T+1 settlement cycle?
1. General Exemptions:
? ?- Transactions negotiated privately but executed on a UK trading venue.
? ?- Transactions executed bilaterally but reported to a UK trading venue.
? ?- The first transaction where the relevant securities are subject to initial recording in book-entry form pursuant to Article 3(2) UK CSDR.
2. Temporary Exemptions:
? ?- Eurobonds (until the EU moves to T+1).
? ?- Other non-GB prefix ISIN bonds (until the relevant ‘home’ jurisdiction moves to T+1).
? ?- Exchange Traded Products (ETPs) (until the EU moves to T+1).
? ?- All Securities Financing Transactions (SFTs), subject to further discussion with public authorities.
These exemptions are designed to provide flexibility and accommodate various transaction types and jurisdictions during the transition to the T+1 settlement cycle.
Who is responsible for the compliance of T+1
The responsibility for compliance with the T+1 settlement cycle lies with all Market Participants, which include:
1. Market Participants:
? ?- Sell-side entities such as banks and large building societies.
? ?- Buy-side entities such as asset managers, insurance companies, pension funds, corporates, local authorities, and educational establishments.
? ?- Trading houses, including market-makers, matched principal traders, hedge funds, high-frequency and proprietary traders.
? ?- Agents, brokers, and custodians.
? ?- Trading, clearing, and settlement venues, including trading venues, central counterparties (CCPs), and central securities depositories (CSDs).
2. Financial Market Infrastructures (FMIs):
? ?- FMIs, including their third-party providers and Swift, are responsible for reviewing and updating their systems and processes to ensure there are no barriers to T+1.
3. Public Authorities:
? ?- The UK public authorities, including HM Treasury (HMT), the Financial Conduct Authority (FCA), and the Bank of England, will support and encourage compliance through regulatory frameworks and oversight.
4. Accelerated Settlement Taskforce (AST):
? ?- AST will monitor and oversee market development, support the journey to T+1, and maintain and develop the UK-TCC as necessary.
Each entity is expected to implement the necessary policies, procedures, and systems to ensure compliance with the T+1 settlement cycle and to promote high standards of settlement discipline and performance.
What are "critical" and "highly recommended" actions recommended by the AST to ensure a smooth and efficient transition to T+1 settlement?
Critical Actions:
1. Scope:
? ?- SC-01: Amend UK CSDR to set the scope of T+1, including relevant exemptions.
? ? ?- Starting from: 01/02/2025
? ? ?- Completed no later than: 11/10/2027
? ?- SC-02: Amend UK trading venues' rulebooks to reflect the scope of T+1.
? ? ?- Starting from: 01/02/2025
? ? ?- Completed no later than: 11/10/2027
? ?- SC-03: Ensure all trading parties comply with the T+1 obligation for the specified instruments and transaction types.
? ? ?- Starting from: 11/10/2027
? ? ?- Completed no later than: 11/10/2027 and ongoing
2. Settlement:
? ?- SETT 01: Complete allocation and confirmation processing electronically by 23:59 UK time on T+0.
? ? ?- Starting from: 01/04/2025
? ? ?- Completed no later than: 31/12/2026 and ongoing
? ?- SETT 02: Submit all settlement instructions to the CSD by 05:59 UK time on T+1.
? ? ?- Starting from: 01/04/2025
? ? ?- Completed no later than: 11/10/2027 and ongoing
? ?- SETT 03: Implement policies and procedures for allocations, confirmations, and settlement instructions.
? ? ?- Starting from: 01/04/2025
? ? ?- Completed no later than: 31/12/2026
3. Financial Market Infrastructures (FMIs):
? ?- FMI 01a: Review all existing procedures, policies, operating frameworks, and technology to ensure no barriers to T+1.
? ? ?- Starting from: 01/02/2025
? ? ?- Completed no later than: 31/12/2025
? ?- FMI 01b: Communicate and implement any proposed updates to users.
? ? ?- Starting from: 01/01/2026
? ? ?- Completed no later than: 31/12/2026
? ?- FMI 02: Publish CREST modernisation programme schedule.
? ? ?- Starting from: 01/02/2025
? ? ?- Completed no later than: 30/06/2025
4. Static Data:
? ?- STAT 01: Implement the Core Principles and templates for Sharing of SSIs.
? ? ?- Starting from: 01/04/2025
? ? ?- Completed no later than: 31/12/2026 and ongoing
5. Securities Financing Transactions (SFTs):
? ?- SFT 01: Automate stock lending recalls processing.
? ? ?- Starting from: 01/02/2025
? ? ?- Completed no later than: 31/12/2026 and ongoing
? ?- SFT 02: Adhere to industry best practices for recall cut-off times and return deadlines.
? ? ?- Starting from: 11/10/2027
? ? ?- Completed no later than: 11/10/2027 and ongoing
Highly Recommended Actions:
1. Settlement:
? ?- SETT 04: Define and publish a target market level settlement efficiency rate.
? ? ?- Starting from: 01/01/2025
? ? ?- Completed no later than: 31/12/2025 and ongoing
? ?- SETT 05: Record and publish settlement data in parallel with current T+2 monitoring.
? ? ?- Starting from: 01/01/2026
? ? ?- Completed no later than: 11/07/2027 and ongoing
? ?- SETT 06: Review all bilateral agreements for T+1 compliance.
? ? ?- Starting from: 01/01/2026
? ? ?- Completed no later than: 31/12/2026
? ?- SETT 07: Implement and use auto partial/split settlement practices.
? ? ?- Starting from: 01/02/2025
? ? ?- Completed no later than: 31/12/2026 and ongoing
? ?- SETT 08: Implement and use auto shaping practices.
? ? ?- Starting from: 01/02/2025
? ? ?- Completed no later than: 31/12/2026 and ongoing
? ?- SETT 09a: Agree and publish new market practice for Place of Settlement and Place of Safekeeping communication.
? ? ?- Starting from: 01/02/2025
? ? ?- Completed no later than: 31/12/2025
? ?- SETT 09b: Implement and use new market practices for Place of Settlement and Place of Safekeeping.
? ? ?- Starting from: 01/01/2026
? ? ?- Completed no later than: 31/12/2026 and ongoing
? ?- SETT 10a: Agree and publish new market practice for Hold & Release functionality.
? ? ?- Starting from: 01/02/2025
? ? ?- Completed no later than: 31/12/2025
? ?- SETT 10b: Implement and use new market practices for Hold & Release functionality.
? ? ?- Starting from: 01/01/2026
? ? ?- Completed no later than: 31/12/2026 and ongoing
? ?- SETT 11a: Agree and publish updated market practice for debt new issuance process.
? ? ?- Starting from: 01/02/2025
? ? ?- Completed no later than: 31/12/2025
? ?- SETT 11b: Implement updated market practices for debt new issuance process.
? ? ?- Starting from: 01/01/2026
? ? ?- Completed no later than: 31/12/2026 and ongoing
2. FMIs:
? ?- FMI 03: Ensure all rule books accurately define systems and processes reviewed.
? ? ?- Starting from: 01/01/2026
? ? ?- Completed no later than: 31/12/2026
? ?- FMI 04: Review and adjust impact tolerances under a T+1 cycle.
? ? ?- Starting from: 01/02/2025
? ? ?- Completed no later than: 11/10/2025 and ongoing
?- FMI 05: Include T+1 scenarios in future industry management simulations.
? ? ?- Starting from: 01/01/2025
? ? ?- Completed no later than: 11/10/2027 and ongoing
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What actions are required by the Market Participants, FMIs and the AST before October 2027?
Before the October 2027 transition to T+1 settlement, several actions are required by Market Participants, Financial Market Infrastructures (FMIs), and the Accelerated Settlement Taskforce (AST).
Market Participants:
1. Review and Assess Internal Processes:
? ?- Identify required changes and automation solutions for all critical and highly recommended actions in settlement, static data, corporate actions, SFT, and FX.
2. Establish a Project Plan:
? ?- Develop a project plan for T+1 transition needs and secure funding for required development and automation.
3. Start Behavioral Changes and Automation Projects:
? ?- Begin implementing necessary changes and automation projects as soon as practicable.
4. Compliance with T+1 Obligations:
? ?- Ensure all trading parties comply with the T+1 obligation in respect of the instruments and transaction types set out in the scope of T+1.
5. Update Policies and Procedures:
? ?- Review and update policies and procedures for allocations, confirmations, and settlement instructions to meet the new deadlines.
Financial Market Infrastructures (FMIs):
1. Review and Update Systems and Processes:
? ?- Conduct a comprehensive review of existing procedures, policies, operating frameworks, and technology to ensure no unexpected barriers to T+1.
2. Communicate and Implement Updates:
? ?- Communicate proposed updates to users and implement identified updates as required.
3. CREST Modernisation Project:
? ?- Publish the CREST modernisation programme schedule and confirm enhancements to support and facilitate T+1.
4. Finalise Rule Books and Policies:
? ?- Finalise and publish any necessary changes to rule books and policies & procedures.
Accelerated Settlement Taskforce (AST):
1. Monitor and Oversee Market Development:
? ?- Continue to support the transition to T+1 by maintaining and developing the UK-TCC as necessary.
2. Lead Completion of Process Reviews:
? ?- Finalise industry best practices and address any outstanding questions on scope, such as the approach to derivatives.
3. Develop and Publish Playbook:
? ?- Create a Playbook for Market Participants to use as they prepare for the transition to T+1.
4. Establish Implementation Command Centre:
? ?- Design and activate an Implementation Command Centre to coordinate the transition.
5. Coordinate Outreach Programs:
? ?- Ensure timely awareness of UK market changes to support the T+1 implementation domestically and internationally.
Recommended Actions & Key Focus Areas for Market Participants, FMIS and the AST for the next 3 years i.e., 2025 - 2027
2025
- Market Participants:
? - Review and assess internal processes against the UK-TCC.
? - Establish a project plan for T+1 transition needs and secure funding.
? - Start behavioural changes and automation projects as soon as practicable.
- FMIs:
? - Review and assess rule books, resilience criteria, etc.
? - EUI confirms enhancements in CREST Modernisation programme.
? - Establish a project plan for T+1 transition needs and secure funding.
? - CCPs to confirm impact, if any, on CCP members.
- AST:
? - Monitor and oversee market development of planning, budgeting, and change.
? - Continue to support the journey to T+1 by maintaining and developing UK-TCC.
? - Lead completion of outstanding process reviews and finalize industry best practices.
? - Consider testing approach and arrangements.
? - Discuss and agree with EUI and UK public authorities on settlement discipline, settlement data, and arrangements to monitor preparedness for the migration to T+1.
2026
- Market Participants:
? - Continue implementation of behavioural and process changes as required.
? - Review and assess Playbook actions to identify any changes required.
- FMIs:
? - Finalize and publish any necessary changes to rule books and policies & procedures.
- AST:
? - Develop and publish Playbook for Market Participants.
? - Continue monitoring developments and recommend remedial actions if necessary.
? - Complete outstanding process reviews and make recommendations as required.
? - Maintain and develop the UK-TCC as necessary.
2027
- Market Participants and FMIs:
? - Implement Playbook requirements and continue implementation of automated solutions and behaviours.
? - Test process changes and automated solutions.
? - Test full T+1 capability.
- AST:
? - Establish Implementation Command Centre.
? - Monitor and oversee UK market readiness for migration weekend.
? - Maintain and develop the UK-TCC as necessary.
2027 – Transition Weekend
- Market Participants and FMIs:
? - Implement remaining T+1 actions.
- AST:
? - Coordinate transition via Implementation Command Centre.
2027 – Post-transition
- Market Participants and FMIs:
? - Address any outstanding transition issues.
- AST:
? - Assess quality of implementation of UK market T+1.
? - Report recommendations for any further changes to HMT/FCA/Bank.
? - Ensure the UK-TCC is integrated into trade association market practices and/or FMI rules.
How will the FCA assess firms' preparedness for T+1?
The Financial Conduct Authority (FCA) will assess firms' preparedness for the transition to T+1 settlement through a combination of engagement, communication, and supervision activities. Here are the key methods the FCA will use:
Engagement with Firms:
***Discussions***:
? ?- The FCA will engage in direct discussions with firms it supervises to understand their preparedness for T+1 settlement.
? ?- These discussions will cover how firms' activities align with the UK T+1 Code of Conduct (UK-TCC) and their specific plans for transitioning to T+1.
Communication and Guidance:
***Communication Tools***
? ?- The FCA will use various communication tools, such as ‘Dear CEO’ letters, speeches, and other appropriate messages, to provide guidance and support for T+1 settlement.
? ?- These communications will encourage firms to take the necessary implementation actions and address any specific questions or concerns that arise during the transition process.
Supervision Assessments:
***Overall Supervision***
? ?- The FCA will incorporate the results of its discussions and engagements with firms into its overall supervision assessments.
? ?- It will evaluate how well firms are aligning their activities with the UK-TCC and their readiness for T+1 settlement.
***Review of Arrangements***
? ?- The FCA will review firms' arrangements for key areas such as corporate actions, standard settlement instructions (SSIs), and the automation of stock lending activities.
? ?- This review will ensure that firms have the necessary processes and systems in place to meet T+1 requirements.
Encouragement and Endorsement:
***Support for UK-TCC (T+1 code of conduct)***
? ?- The FCA will endorse the actions and expected behaviors recommended in the UK-TCC.
? ?- It will encourage firms to comply with the UK-TCC and take the necessary steps to prepare for T+1 settlement.
Coordination with Other Authorities:
***Collaboration***:
? ?- The FCA will coordinate with the Bank of England (BoE) and HM Treasury (HMT) to ensure a smooth transition to T+1 settlement.
? ?- It will participate in discussions and provide support as needed to facilitate the implementation process.
Key Areas of Focus:
1. Corporate Actions:
? ?- The FCA will review firms' arrangements for handling corporate actions to ensure they are prepared for T+1 settlement.
2. Standard Settlement Instructions (SSIs):
? ?- The FCA will ensure firms have appropriate arrangements for the automation and communication of SSIs.
3. Stock Lending Activities:
? ?- The FCA will review and support the automation of stock lending activities to align with T+1 requirements.
By using these methods, the FCA aims to ensure that firms are well-prepared for the transition to T+1 settlement, thereby supporting the integrity and efficiency of the UK financial system.
What support one can expect from the UK public authorities for the transition to T+1 settlement?
HM Treasury (HMT):
- Legislative Support:
? - Amend the relevant part of the UK Central Securities Depositories Regulation (CSDR) to introduce a T+1 requirement from 11th October 2027.
? - Ensure the necessary statutory instruments are in place to facilitate the transition to T+1.
### Financial Conduct Authority (FCA):
- Supervisory Support:
? - Engage in discussions with firms it supervises about their preparedness for T+1 settlement and how their activities align with the UK-TCC.
? - Use communication tools such as ‘Dear CEO’ letters or speeches to support T+1 settlement and encourage firms to take appropriate implementation actions.
? - Address specific questions that arise during the implementation of T+1 settlement.
Bank of England (BoE):
- FMI Supervision:
? - Discuss with relevant FMIs about their preparedness for T+1 settlement and how their activities align with the UK-TCC.
? - Use speeches and other communication tools to support T+1 settlement and encourage firms to take appropriate implementation actions.
? - The Prudential Regulation Authority (PRA) may also engage with relevant banks it supervises to assess their preparedness for the UK transition to T+1 settlement.
General Support:
- Endorsement and Encouragement:
? - The public authorities will endorse the actions and expected behaviors recommended in the UK-TCC.
? - Encourage Market Participants to comply with the UK-TCC and take necessary implementation actions.
Monitoring and Coordination:
- Ongoing Monitoring:
? - The FCA and BoE will monitor the progress of Market Participants and FMIs in preparing for T+1 settlement.
? - Assess the quality of implementation and address any outstanding transition issues post-implementation.
This support framework is designed to ensure that Market Participants within the UK regulatory perimeter take appropriate actions to transition smoothly to the T+1 settlement cycle by the designated date.