By Hannah Buckle, head of UK sales at Dorsum
When the US moved from T+2 to T+1 settlement in May 2024, Andrew Douglas, chair of the UK’s Accelerated Settlement Taskforce, called Europe’s position a “second mover advantage”. The UK was able to watch America go first and borrow what worked.
Generally, the settlement transition in the US was smooth and unproblematic. Data from 29 May 2024, just a day after the new settlement regime came into force, showed that the failure rate on America’s Continuous Net Settlement system sat at 1.9% against a daily average of 2.1% the week before. The new system actually performed slightly better than it had under the two-day cycle the previous week.
The success came as a result of careful preparation forced by a hard deadline. Custodians and asset managers had to automate affirmation processes and tidy up reference data well before May 2024, because manual workflows could not keep pace with same-day settlement. The deadline helped to focus minds after operational automation had been talked about for years after the GameStop saga of 2021.
See also: T+1 settlement: The incoming operational change
In January 2021, the GameStop short squeeze forced Robinhood to restrict trading in the stock. The Depository Trust & Clearing Corporation (DTCC), which provides settlement services for virtually all broker-to-broker equity and listed corporate and municipal debt securities transactions in the US, requires brokers to set aside funds proportional to the risk they’re carrying.
When GameStop’s price moved violently, Robinhood’s required deposit spiked overnight to a level it could not cover. Cutting the settlement window from two days to one halves that risk period and the deposit that comes with it. The SEC cited GameStop directly when it moved to mandate T+1, and the episode gave regulators a public argument that dry operational efficiency arguments never quite had.
Where the UK stands
The UK and EU share an 11 October 2027 go-live date, avoiding the mismatch that hit European funds when the US moved alone. Recent Euroclear data put 83% of UK firms as actively engaged with T+1 preparation, ahead of where the US industry stood at the same point in its countdown.
While that figure looks encouraging, engagement means awareness and planning, and development work is something else. Euroclear’s data also showed 57% of the UK buy-side hasn’t started building yet. In the US, a DTCC-backed survey found 61% of buy-side firms in the same position with only months to go before the deadline.
Some of what slowed US firms down was basic. CIBC Mellon’s Ronald Landry, speaking on a securities finance times panel ahead of the 2024 transition, said some clients still preferred sending settlement instructions by email or fax, and that, clearly, the habit needed to go.
Any UK firm still running on email chains and PDF confirmations as 2027 approaches should consider that a direct warning.
Then there’s foreign exchange, which creates a separate set of problems the UK cannot absorb just by sharing a go-live date with the EU.
Jason Vitale at BNY Mellon warned before the US transition that once American markets closed, managers would have only a couple of hours before the cut-off for CLS, the main multi-currency settlement system.
See also: Accelerated Settlement Taskforce: One-fifth of firms are not engaged with T+1
At the start of 2024, 30% of investors still hadn’t worked out how T+1 would affect their FX settlement at all. Aligning UK and EU timelines removes the worst of that clash between the two regions but can do nothing to close the gap between London and New York market hours. Any UK firm still trading or holding US securities keeps the original problem.
For UK wealth managers and adviser platforms, the practical test is whether trade confirmation, allocation and FX funding can happen on the same day. The FCA expects testing to be underway by December 2026, when we should develop a clearer picture of the UK’s readiness.
Second mover advantage gives the UK a sensible roadmap. In the United States, the move from T+2 to T+1 went largely smoothly. Whether the UK gets the same result largely depends on what happens between now and the testing deadline.
