More haste, less speed? The rush to T+1 could cause disruption for years to come
It is not hard to find short-term worries over global markets’ state of readiness for the US’s transition to one-day settlement in late May. But even if the UK, Europe and those Asian markets still using two-day settlement can adapt to the shift in the longer term, they will also face intense pressure to lessen their dislocation from the US cycle by copying its move. Many also fear the ultimate end-game of same-day or even instant settlement.
First it was the end of Libor, back in 2021 and again in 2023. Now, in 2024, many markets have a new and potentially even more disruptive challenge to negotiate. On May 28, the US, Canada and Mexico will move from a two-day settlement period for securities transactions to just one day after trade date, what the industry calls T+1.
The change was formalised by the adoption of a rule by the US Securities and Exchanges Commission back in February 2023, a move that started the clock on one of the most far-reaching changes to have been attempted in global markets.
Some industry professionals at the sharp end of the transition do not sound confident that things will be entirely smooth.