In November, the European regulator ESMA published plans for the EU to move to a T+1 settlement cycle no later than October 11, 2027, with the UK agreeing to the same deadline earlier this year.
The move to a shorter settlement is expected to release more than £1 billion of margin in the UK due to lower counterparty risks – echoing the benefits seen in the US, where the T+1 transition in May has already seen an estimated reduction in clearing default funding of around US$2 billion.
Speaking at the launch of the UK transition plan last month, the Bank of England’s executive director of financial market infrastructure Sasha Mills stressed that a shorter settlement cycle reduces counterparty risk for both firms and central clearing counterparties (CCPs), which should result in “significant amounts of margin being released by CCPs to members and their clients”.
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