The European Commission proposed Wednesday 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 (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).
“Our proposal will reduce costs, increase efficiency, and improve liquidity, as called for by our industry,” said EU Commissioner for Financial Services Maria Luís Albuquerque: “We will also strive to coordinate with other European countries intending to move to T+1, in particular the United Kingdom and Switzerland, given the close links between our capital markets.”
The proposal sets 11 October 2027 as the appropriate date for the transition to T+1 settlement.
The Commission says 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.
A Commission analysis together with the ESMA Report confirm that the expected benefits – such as increased automation and efficiency of post-trade processes, risk reduction, lower margin requirements and elimination of misalignment-related costs and frictions – should, over time, largely outweigh the initial costs stemming from necessary investments that a move to T+1 will entail.
The proposal will now be submitted to the European Parliament and the Council for their consideration and adoption. The changes will enter into force once the co-legislators have reached an agreement on the proposal and after publication in the EU Official Journal.
