UK Accelerated Settlement – The path forward Post Event Summary
A T+1 Forum Event hosted by EY
UK Accelerated Settlement – The path forward Post Event Summary
An ISITC Europe T+1 Forum event was hosted by EY on the 16th of May, to discuss the transition to accelerated settlement in the UK. It focused on the UK move to T+1, looking at FMI readiness and unique challenges faced by UK markets, as well as firms’ preparations for accelerated settlement.
A special thank you to our speakers Gary Wright (ISITC Europe), Guy Carter (EY), Andrew Douglas (HMT UK T+1 Technical Taskforce) and our panel members Tony Freeman (ISITC Europe), James Wharton (Winterflood Securities), Charlie Pugh (Euroclear) and Taruna Bhagtani (EY) .
The event began with Gary Wright’s opening address, which set out the dates of the UK transition and the settlement ecosystem’s complexity, highlighting the importance of Euroclear in a smooth move to T+1. Gary also addressed potential implications of North American misalignment with international markets and reiterated ISITC’s resolve to support a more inclusive market.
Subsequently, Andrew Douglas gave a speech describing the progress of the T+1 Taskforce towards providing initial principles-driven recommendations by 31st July 2024. Firms were encouraged to use these as input into 2025 budget plans, making their alignment with T+1 a priority. The UK is steadfast in its decision to transition by late 2027, however, the upcoming ESMA report may yet suggest that the EU align with the UK. The sentiment was that firms’ views on the timeline correlated to their place in the value chain; buy-side firms preferred aligning with the US and the sell-side favoured shifting alongside the EU and Switzerland for operational ease. Whilst ensuring acute recommendations is the priority, the deadline could be extended a few months if it would enable seamless market connectivity.
Guy Carter then presented on the approach for UK T+1, noting the criticality of this window of opportunity for firms to deliver better post-trade solutions and reduce risk by mobilising now. New technologies should be prioritised over legacy system upgrades, which would have higher maintenance costs and firms should assess how they can make processing better, not just shorter. To this end, firms should define their business case to mobilise and engage their organisations.
The panel discussed industry perspectives on the transition and how it might take effect. Euroclear expressed their ability to support accelerated settlement, for which they are weighing the benefits of extended evening hours, the time at which LSE closing auction sees most volume and a large input spike, even with high efficiency to support batches. Similarly, buy-side operations teams are finishing later to cover US trading and will be settling a significant amount through CREST in T+1. Although Euroclear could reopen at the weekend, there was consensus that a 3-day weekend is not necessary for the transition to occur.
To enable an optimal transition, larger players should accelerate client engagement through data-driven insights and behavioural change is needed across the industry, to prevent latency from overnight batches. Front-to-back operating model changes such as defined roles and responsibilities, accountability and escalation design are needed with processes to support and metrics to assess the effectiveness of key processes. The UK Taskforce is looking across at indicators from the US to determine what could be applied to UK markets.
Industry players are awaiting the findings in July 2024, although our recommendations to them are:
- Don’t wait for regulatory change to assign budget. Commit capital and resources now.
- Engage in education about T+1 with your upstream and downstream parties.
- Analyse existing operations and processes for errors and delays and improve STP.
The event concluded with closing remarks from Gary Wright (ISITC), who emphasised that there is a clear path to T+1 in the UK and firms should mobilise now, engage clients and bring the industry closer to enable a smoother transition.
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