UK T+1 Technical Group proposes recommendations on migration
02 October 2024 UK
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The T+1 Technical Group (TGT) of the UK Accelerated Settlement Task Force (AST) has published a report outlining its proposed recommendations for implementing the UK’s transition to a T+1 settlement cycle.
This interim report splits the draft recommendations across key focus areas for market participants, including the importance of automation and adherence to market practices.
The final version of these recommendations, to come at the end of the year, will add certainty to the ‘when’, the report says, by finalising an implementation date and a schedule of work covering the period of transition to T+1, with tasks being identified for completion in 2025, 2026, or by the time of implementation in 2027.
As part of Recommendation Zero — the scope of instruments that will be covered by the implementation of T+1 — there are two scenarios.
The first suggests that the UK migrates ahead of the EU and Switzerland. In this scenario, some instruments, such as exchange traded products (ETPs) and eurobonds, will be exempted pending a subsequent transition to T+1 of the EU and Switzerland.
In the second scenario, the UK, EU, and Switzerland migrate to T+1 together. The T+1 group says this is a straight transfer of all instruments covered today by the Central Securities Depository Regulation (CSDR).
The remaining recommendations listed in the report include 43 principle recommendations and 14 additional recommendations.
Principle recommendations cover the critical post-trade activities participants must be able to complete efficiently if the UK’s transition to T+1 is successful. It covers areas such as settlement, financial market infrastructures, and securities financing.
Additional recommendations look at environmental issues that need to be addressed if the UK is to maximise the efficiency gains that T+1 can deliver, the group explains.
TGT states that the additional recommendations are not essential to the successful implementation of a shorter settlement cycle.
An integral consultation with all participants in the UK equity market will run until 31 October 2024.
Andrew Douglas, chair of the TGT, says: “This interim report is a key milestone in the UK’s journey to T+1 settlement, and I would like to extend my gratitude to all those involved in crafting this report and providing the depth of industry expertise needed to shape these draft recommendations.
“As an independent, inclusive working group, supported by the public authorities, I’m calling on all market participants to engage in this consultation, so that together we can ensure the final recommendations for implementation reflect the full spectrum of industry needs.”
The UK government has committed to the transition to T+1 settlement by 31 December 2027 on the 10 recommendations of the original AST report from March 2024, all of which were accepted by the government.
The final report incorporating stakeholder feedback is expected in December, and will set out the final recommendations, including the transition timing, as well as interactive tools to help firms plan their transition.
This interim report splits the draft recommendations across key focus areas for market participants, including the importance of automation and adherence to market practices.
The final version of these recommendations, to come at the end of the year, will add certainty to the ‘when’, the report says, by finalising an implementation date and a schedule of work covering the period of transition to T+1, with tasks being identified for completion in 2025, 2026, or by the time of implementation in 2027.
As part of Recommendation Zero — the scope of instruments that will be covered by the implementation of T+1 — there are two scenarios.
The first suggests that the UK migrates ahead of the EU and Switzerland. In this scenario, some instruments, such as exchange traded products (ETPs) and eurobonds, will be exempted pending a subsequent transition to T+1 of the EU and Switzerland.
In the second scenario, the UK, EU, and Switzerland migrate to T+1 together. The T+1 group says this is a straight transfer of all instruments covered today by the Central Securities Depository Regulation (CSDR).
The remaining recommendations listed in the report include 43 principle recommendations and 14 additional recommendations.
Principle recommendations cover the critical post-trade activities participants must be able to complete efficiently if the UK’s transition to T+1 is successful. It covers areas such as settlement, financial market infrastructures, and securities financing.
Additional recommendations look at environmental issues that need to be addressed if the UK is to maximise the efficiency gains that T+1 can deliver, the group explains.
TGT states that the additional recommendations are not essential to the successful implementation of a shorter settlement cycle.
An integral consultation with all participants in the UK equity market will run until 31 October 2024.
Andrew Douglas, chair of the TGT, says: “This interim report is a key milestone in the UK’s journey to T+1 settlement, and I would like to extend my gratitude to all those involved in crafting this report and providing the depth of industry expertise needed to shape these draft recommendations.
“As an independent, inclusive working group, supported by the public authorities, I’m calling on all market participants to engage in this consultation, so that together we can ensure the final recommendations for implementation reflect the full spectrum of industry needs.”
The UK government has committed to the transition to T+1 settlement by 31 December 2027 on the 10 recommendations of the original AST report from March 2024, all of which were accepted by the government.
The final report incorporating stakeholder feedback is expected in December, and will set out the final recommendations, including the transition timing, as well as interactive tools to help firms plan their transition.
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