T+1 transition: ‘Automation should cost less than lunch’

With the US successfully transitioned to a T+1 settlement cycle and the UK and Europe well on the way, what does the future look like and how will trade processes change? Experts at the FIX EMEA Trading Conference told Euromoney’s head of capital markets Laurie McAughtry that automation is everything – but it does not need to break the bank.

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.

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Matt Johnson, DTCC

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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