IMN: The market has eyes on Asia and Europe for T+1
07 February 2025 US
Image: Alicia/stock.adobe.com
Following the successful T+1 transition in the US, eyes are now on Europe and Asia and the “high potential” that they’ll be moving to a T+1 environment, says Marney McCabe, head of relationship management for Agency Lending at Fidelity Investments.
Panellists at the IMN’s Beneficial Owners' International Securities Finance & Collateral Management Conference praised the results from the US transition to T+1, despite initial anxiety and concern around the preparation for such a move.
When the US transitioned from T+3 to T+2 in 2017, it fell behind other jurisdictions which had ventured ahead with the move, noted Bob Cavallo, director of securities finance and collateral product development at the Depository Trust and Clearing Corporation (DTCC). With T+1, the US was leading the transition.
“The UK, EU, Switzerland and Liechtenstein are all looking to move to T+1 in October 2027. From a DTCC perspective, we have been collaborating with and actively sharing our feedback and key data points on same day affirmation and fail rates with the UK Accelerated Taskforce and ESMA, providing materials on what worked well during planning and implementation,” he said.
He continued: “Coming out of T+1, 55 per cent of the trades that are done globally right now settle on a T+1 settlement cycle. When the UK and Europe move, the estimate is that we’re going to have close to 90 per cent of the trades being done on a T+1 settlement cycle.”
The European Securities and Markets Authority (ESMA) has launched the EU T+1 coordination committee and has put together a governance structure to manage the migration to a shorter settlement cycle. An October 2027 move date for the UK, EU, Switzerland, and Liechtenstein has been confirmed.
The APAC region has also made reference to that same October time frame, said McCabe, “although they haven't formally announced that they would be following suit with Europe”.
During the panel — which was moderated by Mary Jane Schuessler, director of equity finance, Global Equity Finance at BMO Capital Markets — McCabe highlighted the stark difference between the US move to T+1 and what will be in store for other regions looking to do so.
She noted that while the T+1 playbook for the shorter settlement cycle can be leveraged, when a geographical area like Europe or Asia goes to T+1 it is going to be a different challenge for the industry as a whole, not just for securities lending, due to the fragmentation of those jurisdictions.
Furthering the conversation, McCabe pinpointed how T+1 has opened up the door to have direct conversations around finding a way to get sell notifications pre affirmation.
“The move to T+1 in Europe and APAC will further those discussions. There seems to be a little bit more openness, because pre-notifications can also open up at markets like Taiwan and soon South Korea,” she suggested.
Speaking to the panel, Mike Norwood, global head of Trading Solutions at EquiLend, posed the question: are there improvements that still need to be made in relation to T+1?
He indicated that this will depend on the processes firms are engaged with, operational touch points, and manual interventions. Norwood continued: “When there is opportunity to invest in technology and streamline processes and to take away reliance on non-real-time information, if there's an opportunity to embrace DLT, what does that bring to your infrastructure?”
He emphasised the importance of reviewing these key aspects “because the industry is not getting easier”.
“Things are going to become faster and faster. Mobility matters, velocity matters, access to information matters, reporting regimes are going to drive more ready access to information, and more repeated broadcast of that information,” he explained. “It is a never ending process. It constantly has to be evaluated, and where you can make those improvements, that investment will pay off.”
Panellists at the IMN’s Beneficial Owners' International Securities Finance & Collateral Management Conference praised the results from the US transition to T+1, despite initial anxiety and concern around the preparation for such a move.
When the US transitioned from T+3 to T+2 in 2017, it fell behind other jurisdictions which had ventured ahead with the move, noted Bob Cavallo, director of securities finance and collateral product development at the Depository Trust and Clearing Corporation (DTCC). With T+1, the US was leading the transition.
“The UK, EU, Switzerland and Liechtenstein are all looking to move to T+1 in October 2027. From a DTCC perspective, we have been collaborating with and actively sharing our feedback and key data points on same day affirmation and fail rates with the UK Accelerated Taskforce and ESMA, providing materials on what worked well during planning and implementation,” he said.
He continued: “Coming out of T+1, 55 per cent of the trades that are done globally right now settle on a T+1 settlement cycle. When the UK and Europe move, the estimate is that we’re going to have close to 90 per cent of the trades being done on a T+1 settlement cycle.”
The European Securities and Markets Authority (ESMA) has launched the EU T+1 coordination committee and has put together a governance structure to manage the migration to a shorter settlement cycle. An October 2027 move date for the UK, EU, Switzerland, and Liechtenstein has been confirmed.
The APAC region has also made reference to that same October time frame, said McCabe, “although they haven't formally announced that they would be following suit with Europe”.
During the panel — which was moderated by Mary Jane Schuessler, director of equity finance, Global Equity Finance at BMO Capital Markets — McCabe highlighted the stark difference between the US move to T+1 and what will be in store for other regions looking to do so.
She noted that while the T+1 playbook for the shorter settlement cycle can be leveraged, when a geographical area like Europe or Asia goes to T+1 it is going to be a different challenge for the industry as a whole, not just for securities lending, due to the fragmentation of those jurisdictions.
Furthering the conversation, McCabe pinpointed how T+1 has opened up the door to have direct conversations around finding a way to get sell notifications pre affirmation.
“The move to T+1 in Europe and APAC will further those discussions. There seems to be a little bit more openness, because pre-notifications can also open up at markets like Taiwan and soon South Korea,” she suggested.
Speaking to the panel, Mike Norwood, global head of Trading Solutions at EquiLend, posed the question: are there improvements that still need to be made in relation to T+1?
He indicated that this will depend on the processes firms are engaged with, operational touch points, and manual interventions. Norwood continued: “When there is opportunity to invest in technology and streamline processes and to take away reliance on non-real-time information, if there's an opportunity to embrace DLT, what does that bring to your infrastructure?”
He emphasised the importance of reviewing these key aspects “because the industry is not getting easier”.
“Things are going to become faster and faster. Mobility matters, velocity matters, access to information matters, reporting regimes are going to drive more ready access to information, and more repeated broadcast of that information,” he explained. “It is a never ending process. It constantly has to be evaluated, and where you can make those improvements, that investment will pay off.”
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