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In today’s fast-paced environment, achieving financial agility is key to helping firms instantly respond to market fluctuations and shifting conditions. Adopting an accelerated settlement cycle will not only enhance operational efficiency and reduce settlement risk but also promote agility within the financial ecosystem – allowing faster access to funds to capitalize on investment opportunities.
The US has demonstrated in its May 28 2024, migration to T+1 that a condensed settlement cycle provides the right equilibrium between increasing efficiencies and mitigating risk for the industry – as validated in the T+1 After Action Report issued by The Securities Industry and Financial Markets Association, Investment Company Institute and DTCC. Although the move to T+1 settlement had far-reaching implications beyond the US borders, industry transition metrics in the report informed that fail rates – which have a direct impact on credit and liquidity risks – had largely remained consistent with T+2 settlement levels despite having to handle several major events following implementation.
Synchronizing settlement cycles
Today, approximately 55% of global market activities are settling on T+1; and this upward trend is anticipated to continue, reaching approximately 85% to 90% by 2028 as the accelerated settlement cycle movement gains momentum globally. Standardizing settlement cycles across the globe will help to reduce market fragmentation and enable non-T+1 markets to regain their competitive edge when competing for global institutional investors’ attention. Over the years, the industry has witnessed major markets transition to shorter settlement cycles, and it is only a matter of time before key global markets will converge at T+1 – driven by efficiency gains and market forces.
In the transatlantic region, the United Kingdom, Switzerland, Liechtenstein and the EU have targeted for a T+1 migration on October 11 2027, and the industry has reacted positively to the coordinated shift in transition timeline. This will help to streamline and simplify the post-trade process for firms engaged in global cross-border trading activities, as well as avoid challenges associated with disparate settlement cycles when managing corporate actions, recall, exchange-traded funds and foreign exchange transactions. In addition to an aligned T+1 implementation schedule, early planning and preparation will allow markets or regions to tackle thorny technical issues and unforeseen hiccups, such as developing tailored options for managing foreign exchange trades.
Considering Asia’s heterogenous landscape where markets are at different stages of maturity and settlement cycles, achieving a harmonized settlement cycle may be more feasible among Southeast Asian countries, given their shared focus on promoting economic growth and regional integration. As markets in Asia evaluate the impact of cutting their settlement cycles, firms need to implement solutions that standardize and automate processes to reduce market friction and effectively address regional nuances.
Navigating regional nuances
While the successful transition to T+1 in the US offers highly transferable lessons and best practices – such as industry collaboration and communications, increased automation, behavioural changes and comprehensive industry testing – each individual market or region will have to manage local nuances.
For example, T+1 will be trickier for EU’s fragmented post-trade network compared with the UK, which uses a single central securities depository ( CSD ). With about 30 CSDs and clearing houses operating on different processing schedules and operational frameworks in the EU, meeting a tight settlement processing timeline will require effective cross-border inventory control to facilitate efficient settlement processing.
Identifying key insights
Bearing in mind regional implications and the intricacies of migrating to a faster settlement cycle, one remarkable fact jumps out from the US experience: advanced levels of automation enabled by central matching platforms to achieve straight-through processing makes a huge difference in a compact settlement schedule. As widely discussed in the past, rapid processing speed is even more critical for cross-border transactions where geographical and international time differences will create even tighter deadline challenges for many aspects of the post-trade settlement chain, including resolving trade exceptions.
As automation adoption varies significantly across Asia, the shift to T+1 may be challenging for highly manual markets. To prepare for a T+1 future, the transformation journey starts with enhancing automation capabilities and eliminating manual touchpoints.
Optimizing post-trade operations
A noteworthy consideration when implementing post-trade automated solutions is that inaccurate standing settlement instructions ( SSIs ) remain an industry pain point where research has shown that a significant number of failed trades are linked to this issue. And the root cause of this problem? Firms are still relying on error-prone manual processes and internal data stores containing stale and inaccurate data to manage and communicate SSIs. This long-standing issue can be eradicated by leveraging a centralized online global database to maintain and communicate golden-source SSIs, to mitigate operational risk and reduce trade fails. Automation of SSIs is also among the specific areas highlighted as critical in the UK Accelerated Settlement Taskforce UK T+1 Code of Conduct published on February 6, 2025.
Taking concrete steps
While support from third-party vendors, market infrastructures and industry bodies is enabling, the ultimate responsibility for preparation lies with individual firms. We can think of post-trade processing as an interconnected chain. Every link matters. If one link falters, the entire chain is compromised. It is important for firms to start preparing now, as proactive readiness will better prepare firms for an era of accelerated settlement cycles.
Val Wotton is Managing Director and General Manager of NSCC’s Equity Clearing, DTC’s Settlement Service and DTCC’s Institutional Trade Processing ( ITP )
