Accelerated Settlement in the UK

On 20 June, UK Finance brought together industry and policymakers for ‘Accelerated Settlement in the UK’.

This conference welcomed over 300 participants from across the investor community, broker dealers, custody banks, central securities depositories (CSDs), trade associations, legal and consultancy practitioners, regulators, and government representatives. We heard from a range of domestic and international speakers, who shared insights and perspectives on a future UK transition to T+1 settlement. 

Of highlight was the keynote speech delivered by US Securities and Exchange Commission (SEC) Chair Gary Gensler, who shared his advice following the US’ transition to a T+1 settlement cycle in May. Key takeaways include: 

  • T+1 lowers operational and counterparty risk and increases efficiency. It has benefits for both everyday investors – who will be able to receive their money quicker – and institutional investors – who will have liquidity freed up more quickly.
  • The US’ smooth transition was by no means an accident, but rather the result of thousands of market participants who worked with the SEC. Transitioning to T+1 is a team sport. 
  • It is important to set an implementation date and try your best to stick to it. This helps organisation, planning and implementation. 
  • Transition costs are unavoidable, for instance, international investors may need to shift their operations to cover foreign currency risks. 
  • Time zones are also important; however, the UK’s time zone is one of its strengths. The UK will benefit from the US’ move to T+1, for example, more so than some eastern markets. 
  • It is also important to note that we already live in a world where settlement cycles are not aligned, and market participants have always found ways to overcome this.
  • Given the US’ success and the benefits of T+1, it might be time to consider raising the possibility of further shortening beyond T+1. 

We were also pleased to be joined on the day by Sebastijan Hrovatin from the European Commission, who emphasised the importance of close collaboration between the EU and the UK. UK Finance continues to advocate for coordination between the UK, the EU and Switzerland with regards to a future T+1 implementation date. 

From a UK perspective, conference participants heard from Charlie Geffen, Chair of the Accelerated Settlement Taskforce, as well as Andrew Douglas, Chair of the Technical Group and all of the leads of the Technical Group’s workstreams, covering operations, scope and alignment, trading and liquidity, lessons learnt from the US, and legal and regulatory. The depth and breadth of these updates were illustrative of the detailed analysis and industry collaboration underway in the UK.

Our current understanding of the UK’s next steps in its T+1 journey is as follows:

  • Charlie Geffen recommended in his report that the UK move to T+1 no later than 2027, pending the analysis of the Technical Group.
  • The Technical Group is due to publish its recommendations by the end of 2024, this will include key information such as the scope of the move and crucially, a date.

To find out more about Accelerated Settlement, our short explainer is here and our paper is here