The IA recommends that the UK transitions to T+1 settlement in Autumn 2026
In its recently published paper, titled “A Transition to T+1 Settlement in the UK, EU and Switzerland”, the Investment Association (IA) outlines its views on transitioning to a T+1 settlement cycle in the UK, EU, and Swiss markets.
The IA is an active member of the UK’s Accelerated Settlement Taskforce, which published its initial recommendations on 28 March 2024. Additionally, the IA serves on the steering committee of the subsequent technical group. The technical group published its interim report, along with a short consultation, on 28 September 2024. The report contains 43 principal recommendations and 14 additional recommendations. A subsequent and final report is expected in December 2024, outlining a path to the UK’s transition.
The views expressed in its paper are based on the average positioning of IA member firms’ views, which were gathered via a survey fielded in July 2024 following the North American transition. The full paper can be viewed here.
Key Points
Global Alignment and Efficiency:
The transition to a T+1 settlement cycle is aimed at enhancing market efficiency, increasing investor confidence, and ensuring competitiveness.
Aligning settlement cycles globally will reduce trading friction and costs, benefiting end investors.
Transition Timeline:
The IA recommends that the UK, EU, and Switzerland transition to T+1 settlement in Autumn 2026.
The association acknowledges that other industry sectors might require more time for the transition, and that the UK and Europe's political and regulatory schedules could make a 2026 transition difficult.
Safe-Harbour Exemption:
The Association recommends that if the UK transitions ahead of the EU, a "safe-harbour" exemption should apply to UK traded and settled exchange-traded products (ETPs) until the EU transitions. This exemption should also apply to Eurobonds.
Impact on Mutual Funds:
The IA recommends, but does not mandate, transitioning the mutual fund subscription and redemption settlement cycle to T+2 to coincide with the T+1 transition in capital markets.
Considerations for Investment Managers:
Investment managers need to consider global market realignment, European market alignment, and transferable solutions from the North American T+1 transition.
They should also address further areas such as shortening the fund settlement cycle and managing securities lending and sale notifications.
Investor Impact and Market Competitiveness:
The transition aims to reduce costs and improve efficiency for investors.
The primary goal of transitioning to T+1 is to align settlement cycles globally, reducing trading friction and costs. This alignment benefits the entire market ecosystem rather than providing a competitive edge to any single jurisdiction.
Conclusion:
The IA believes that the lessons learned from the North American transition can be applied to the UK, EU, and Swiss markets, making the T+1 transition achievable by Autumn 2026. Collaboration between regulatory bodies is crucial to ensure a smooth transition.
These points highlight the importance of global alignment, the recommended timeline, and the considerations for investment managers and stockbroking firms in preparing for the transition to T+1 settlement.
“The acceleration of global settlement cycles is a topic we’re watching closely at Titan Institutional Services. This latest paper from the Investment Association examines key topics for consideration and presents various recommendations concerning implementation of T+1 in the UK. With the IA recommending implementation by Autumn 2026, it’s more vital than ever for market participants to ensure they’re prepared.”
Andrew Watson
Chief Commercial Officer
Titan Institutional Services
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