The Commission has proposed to shorten the settlement period for EU transactions in transferable securities from two days to one. The proposed legislative amendment would shorten the settlement cycle on securities – such as shares or bonds executed on EU trading venues – from two business days (the so called “T+2”) to one after the trading takes place (“T+1”). Settlement is the process through which the buyer receives the security and the seller receives the cash. The move to T+1 aims to strengthen the efficiency and competitiveness of post-trade financial market services in the EU, which are vital to a well-functioning Savings and Investments Union (SIU).Having carefully considered the recommendations in the European Securities and Markets Authorities’ (ESMA) report in cooperation with the European System of Central Banks (ESCB) and the stakeholder input, the Commission is proposing a targeted amendment to the Central Securities Depositories Regulation (CSDR).The proposal sets 11 October 2027 as the appropriate date for the transition to T+1 settlement. This timeline will give market participants sufficient time to develop, test and agree processes and standards to ensure an orderly and successful introduction of T+1 on EU capital markets. The proposal is also future proof, setting a maximum duration for the settlement cycle (T+1) while allowing market participants to settle their transactions faster, at T+0.More concretely, the Commission proposal for a move to T+1 is intended to have the following impact:It will promote settlement efficiency and increase the resilience of EU capital markets. It will also help develop deeper and more liquid capital markets, which is a key objective of the SIU. The shorter settlement takes, the shorter the risks faced by buyers and sellers last, and the shorter investors have to wait to receive the money or securities they are owed. As the allocated cash and securities put aside for a transaction, as well as the collateral to guarantee the transactions, are blocked for a shorter period of time, this will increase the opportunities for market participants to enter in other transactions, release capital, and increase trading volumes. Moreover, the move to T+1 will require increased automation of post-trading processes. This will lead to more modern and efficient post- trading processes across the EU.
It will avoid market fragmentation and costs linked to misalignment between EU and other global financial markets, contributing to the competitiveness of EU capital markets. Many jurisdictions such as China, India, the United States and Canada have already shortened their settlement cycle to T+1. Other international capital markets – such as the UK or Switzerland – have committed to or are considering moving to T+1 as mandatory settlement. EU market participants faced costs as they had to adjust to a growing number of capital markets operating on a different settlement cycle from the EU
