- The complexity of European T+1 means project teams will likely need to be larger than for North American T+1.
- The T+1 implementation budget for a small buy-side firm is likely to start at $223,000. In contrast, the budget for a large global custodian is likely to top $36 million.
- Firms will need to further automate their processes to be able to handle volume increases, particularly as recent market volatility has resulted in record volumes.
- An average of 83% of interviewee firms’ equity flow goes through automated central trade matching and an average of 71% of fixed income flow.
- 28% of respondent firms have yet to begin planning for the move to shorten the settlement cycle to T+1, which is planned for implementation in October 2027.
London, 4 June 2025 – Firebrand Research, a specialist capital markets research and advisory firm, in collaboration with Clearstream, The Depository Trust & Clearing Corporation (DTCC) and Euroclear, has released a new research report, ‘Tackling Post-Trade Friction: Supporting a Global Shortened Settlement Cycle,’ which takes an in-depth look into industry preparations for 11 October 2027 when the UK, EU, Liechtenstein and Switzerland move to T+1 settlement.
The report, which is based on interviews with operations and technology teams representing 45 firms from the asset management, custodian, bank and brokerage communities, outlines some of the significant issues European markets will face as the shortened settlement cycle gets closer to the implementation date. It also highlights nine key success factors learned from firms’ North American T+1 implementations that should be considered for Europe, including budgets.
The European T+1 challenges include operational issues and subsequent failures that have resulted in significant costs including financial penalties related to the Settlement Discipline Regime. The research reveals the following.
- 71% of interviewee settlement failures in 2024 were caused by counterparty shorts and 21% caused by data issues, which include incorrect or stale Standing Settlement Instructions (SSIs).
- An average of 83% of interviewee firms’ equity flow goes through automated central trade matching and an average of 71% of fixed income flow, but more automation is needed. Improved operational processes and automation between post execution trade matching and pre-settlement matching at the CSD is necessary to eradicate mis-match issues relating to SSIs and Place of Settlement (PSET) that cause trade failures. Firms active in the European markets face issues regarding the timely sharing of accurate and detailed settlement data and differences in custodian and Financial Market Infrastructure (FMI) and custodian market practices.
- Interviewees’ greatest concerns about the European move to T+1 relate to a potential misalignment in implementation across the region, foreign exchange misalignment, PSET matching and incorrect SSIs.
As a result of market differences across the region, the move to T+1 in Europe will be a more complex and costly process than it was for North America, involving larger teams to deliver a smooth transition working with the higher number of FMIs, regulators and markets involved.
The costs of North American T+1 projects were dominated by Full-Time Equivalent (FTE) hours and investment in automation, a proven critical enabler of T+1 settlement. Further, the responsibility of client engagement and education sat largely with custodians, asset servicers and FMIs, with core teams at subcustodians and global custodians ranging from five people to more than 100 globally.
“The European move to T+1 is undoubtedly much more complex from a planning and implementation standpoint than the North American transition. Not only are there more currencies, market infrastructures, market participants and regulators involved, there are also significantly different market practices to accommodate,” commented Virginie O’Shea, Founder of Firebrand Research. “However, the research also shows that valuable lessons have been learned in previous moves to shorten the settlement cycle such as the benefits of early testing and strong governance.”
“With the move to T+1 settlement planned for October 2027, the European markets face a complex transition due to multiple jurisdictions with different FMIs and market practices,” said Val Wotton, Managing Director and Global Head of Equities Solutions, DTCC. “While the report highlights operational issues and data inconsistencies as significant challenges, leveraging the lessons learned from other regions’ move to T+1 – particularly regarding automation and client engagement – will be instrumental in ensuring a smooth transition across European markets. Post-trade automation has proven to be a critical enabler of T+1 settlement, significantly reducing errors and operational costs. Therefore, it is imperative that firms allocate sufficient resources and budget to invest in advanced automation systems, including technology to support central matching and standing settlement instructions. Further, we strongly advise firms to commence impact assessments, counterparty analysis and process optimisation initiatives. Initiating these efforts early and utilising available resources can significantly enhance the transition to T+1. We remain committed to partnering with the global financial services industry and fostering collaboration across regions to mitigate risk, enhance efficiency and ensure market stability.”
Dirk Loscher, CEO Clearstream Banking AG, added: “It is clear from the research conducted that many market participants are already investing significant time and resources in preparation for the move to accelerated settlement. Clearstream is committed to helping its clients prepare for the change both from a day-to-day operational and tactical level, as well as through industry consultation and regulatory working groups aimed at delivering standards and greater market harmonisation – two critical ingredients required to support a shortened settlement cycle in Europe.”
Isabelle Delorme, Head of Product Strategy and Innovation Euroclear group said: “As the industry prepares for T+1 in Europe, Euroclear is proud to play a pivotal role in this transformative journey. We are working closely with our clients and leveraging our deep data insights to improve upstream processes, enhance matching performance and ensure settlement efficiency across Europe. With our pan-European perspective and strong CSD network, we are committed to making it easier for clients to navigate complexity, reduce fails and succeed in a shorter settlement cycle – keeping in mind that the pre-settlement space is critical to getting T+1 right. We see this as an opportunity for markets to work together to achieve a shared goal.”
