T+1 settlement is moving from concept to implementation, with the UK confirming the shift to T+1 for cash securities on 11 October 2027, and the EU expected to follow suit. With just over two years to go, regulators welcome the change but are clear that firms need to begin preparing now.

This represents more than a technical adjustment. As we have seen in the US, the move to T+1 settlement has far-reaching implications across operations, technology, and governance. Firms that take early steps to streamline post-trade processes, increase automation, and strengthen coordination with custodians, brokers, and vendors will be better placed to manage the transition. The FCA has stated it will act if firms are not prepared, even while supporting industry efforts.

In this blog, we explore what the shift to T+1 means for UK and EU firms, outline key regulatory expectations, identify common challenges already emerging, and set out practical ways firms can begin preparing now.

 

Regulatory expectations

Authorised funds are not expected to move to trade-date unit pricing and dealing. Instead, the industry recommendation is that they adjust their settlement cycle for subscriptions and redemptions to T+2, so that fund unit settlement remains practical while aligning more closely with the underlying securities markets’ move to T+1.

The FCA has identified several areas where firms should focus early, including budgeting, systems upgrades, operational testing, and counterparty alignment. Importantly, trade associations have recommended that authorised funds adopt T+2 settlement for unit dealing rather than moving to trade‐date unit dealing. The FCA supports this recommendation, subject to implementation feasibility. This approach is intended to reduce settlement lag and align fund unit settlement with faster securities settlement (to T+1), thereby increasing consistency and reducing investor impact during the transition period.

 

Scope of firms affected

T+1 settlement will affect any firm involved in trading, clearing, or custody of cash equities and bonds on UK or EU venues. This includes investment firms, custodians, brokers, asset managers, and supporting third-party vendors. While SFTs (Securities Financing Transactions) remain outside the scope of this change, related operational dependencies, such as securities lending recalls and FX settlement, will still require careful alignment to meet T+1 deadlines.

Industry surveys suggest that many firms have already identified the changes required. The challenge now is execution; regulators will increasingly test whether firms can demonstrate practical readiness.

 

What is changing

At present, most securities in the UK settle on a T+2 basis, meaning two business days after the trade date. From 11 October 2027, that cycle will shorten to T+1, bringing the UK in line with the US and, in due course, the EU. This effectively cuts the time available for trade allocation, confirmation, funding, and settlement activity in half, placing greater pressure on same-day processes.

 

What the UK T+1 Code of Conduct requires

The Accelerated Settlement Taskforce has set out a UK T+1 Code of Conduct which defines the new market standards. Among the most critical:

  • Trade allocations and confirmations must be completed on the same day, no later than 23:59 UK time on trade date.
  • Settlement instructions must be submitted to the CSD by 05:59 UK time on T+1.
  • Scope covers cash equities and bonds traded on UK venues, with temporary T+2 exemptions for Eurobonds and exchange-traded products. (SFTs) remain outside the scope of this change.
  • Operational dependencies such as securities lending recalls and FX settlement need closer coordination to align with market cut-offs.

These are not simple deadline changes. They require a shift in governance, controls, and data standards across the full post-trade chain.

 

Governance questions to consider

Supervisors are already framing T+1 as a governance issue, not just an operational one. Boards and senior managers should be asking:

  • Can trade allocations and confirmations be completed on trade date without exception?
  • Are standing settlement instructions and reference data fully aligned across all counterparties?
  • Have FX cut-offs, CLS processes, and fallback arrangements been reviewed and tested?
  • Do securities lending processes support timely recalls ahead of market close?

The answers to these questions need to be backed by documented evidence, not just policy statements.

 

Common challenges

Across firms, several recurring issues are emerging: manual allocations creating late backlogs; outdated standing settlement instructions leading to mismatches; vendor SLAs not aligned with the 23:59 and 05:59 deadlines; late securities lending recalls; and FX instructions missing CLS cut-offs.

These are not unusual. They are longstanding processes designed for T+2 settlement. The move to T+1 simply exposes the gaps.

We have already seen many of these same issues play out in the US transition to T+1. Firms there faced significant pressure around allocations, data standards, and funding cut-offs, with mismatches often leading to settlement fails. The UK and EU now have the benefit of learning from that experience, but only if they act early to address these weaknesses before go-live.

 

What firms need to do now

With just over two years until the October 2027 deadline, firms should be moving from awareness into planning and execution. Key priorities include:

  • Carrying out readiness assessments to map trade flows, governance and cut-offs, and to highlight where change is needed.
  • Aligning operating models and third-party arrangements so that internal processes and vendor SLAs can reliably meet the 23:59 and 05:59 deadlines.
  • Strengthening exception management through clearer data standards, greater use of automation, and the introduction of partial settlement tools.
  • Reviewing FX governance to ensure CLS processes, cut-offs and fallback arrangements are understood and properly overseen.
  • Planning for implementation by preparing go-live playbooks that cover the transition weekend, the double settlement day, and communication with both regulators and clients.

The objective is not perfection, but clarity and control. Firms that can demonstrate this will give their boards, clients, and regulators confidence that T+1 readiness is embedded in practice.

 

We are already working with market participants on these issues and can provide support where firms would value an external perspective.

Get in touch with fscom today to start preparing for T+1.