Great Britain to shorten securities settlement times: what it means for global markets

By The Allowance

In a move reflecting the pace of global financial markets, Great Britain has officially announced its intention to reduce the settlement period for securities trades from two days. The change that is set to take effect by October 11, 2027, was confirmed by Finance Minister Rachel Reeves on Wednesday, February 19, 2025. It brings attention to the evolution of the UK’s financial ecosystem promising more efficiency, risk reduction, and inevitably disruption.

Although it seems merely a logistical adjustment, it is an advancement of an age-old process. What this means for Britain, its investors, and the European Financial Sector as a whole is still up for debate.

The shift to T+1: a worldwide pattern

The transformation to T+1 (trade date plus one day) is not unprecedented. The United States and Canada have already committed to this standard by 2024.  India, commonly associated with its rapidly growing financial sector, had already completed its transition to T+1 settlements a year prior to that, in January 2023.

This ongoing global desire toward faster settlement times is driven by the necessity to reduce risk in financial markets. Comparing the scenarios where the trade takes one day to settle and where trade takes two days to settle, in the latter one the market participants are exposed to potential losses often resulting from price fluctuations or operational errors. In this case, the risk is halved by shortening the duration to T+1.

Rachel Reeves’ announcement highlights the UK’s aim to maintain its competitiveness in comparison to the US, Canada, and other global financial hubs, which adopted similar policies. Still, the choice of 2027 as the target date may leave the experts perplexed and run the risk that Britain may stay behind other major financial markets.

Why is settlement speed so important?

Shorter settlement periods have been shown to have significant far-reaching effects on investors, financial institutions, and the overall economy by causing:

Reduced risk exposure

For institutional investors and retail traders alike, T+1 means less time waiting for transactions to finalize. This is particularly beneficial during periods when the market is volatile. Additionally, it also lessens the chance that counterparties will fail to fulfill their obligations.

Improved liquidity

With faster settlements, the capital frees up more swiftly. Thanks to that investors can reinvest their funds sooner, boosting market activity and enhanced liquidity.

Operational pressure

Transition to T+1 requires multiple technological and operational upgrades. That said, brokers, clearinghouses, and custodians must be certain that their systems are advanced enough to handle higher deadlines, quicker and more efficient error detection, and complex reporting.

How will this impact Europe?

Despite the UK’s Brexit in 2020, its financial markets remain closely linked to those of Europe. A shift to T+1 could prompt other major economic hubs in Europe, such as Germany and France, to follow Britain’s path. Although the European Union has not yet disclosed a clear schedule for implementing  T+1, we may safely assume that the pressure will intensify as competition from other international financial markets rises. The longer Europe hesitates, the larger the competitive edge for others, who by adopting quicker settlements attract investors seeking faster and more efficient markets. Furthermore, aligning settlement standards across borders would undoubtedly benefit Europe and the UK, reducing operational complexities in multiple jurisdictions.

Challenges ahead

There are still some drawbacks to the transition to T+1. The technological and procedural demands caused by shorter settlement cycles may impede the work of smaller financial institutions and brokers. Moreover, what could complicate the smooth implementation of T+1 are cross-border transactions, which require close coordination across numerous markets, currencies, and different time zones.

What will be crucial in years to come is the careful planning of Clearinghouses like Euroclear and the London Stock Exchange Group in preventing operational bottlenecks, ultimately ensuring that both systems and participants are ready by 2027.

A broader vision for financial resilience

Britain’s move toward T+1 can be largely viewed as a continuous effort to secure the future of its financial ecosystem. Considering the global markets becoming increasingly interconnected and more technology-driven than ever, the ability to implement solutions and adapt to evolving standards will be crucial. Nevertheless, this shift should not be taken into account without context. Rather, it should be viewed and put into effect with initiatives that address other pressing issues, such as cybersecurity threats, market inclusivity, or systematic risks. By doing that, faster settlement times will be able to reach their full potential of enhancing trust and resilience in financial markets.

The takeaway

Even while the October 2027 target date for T+1 might seem distant, this announcement is a pivotal step in bringing Britain into line with global trends. It isn’t just a technical adjustment but a vision for setting future trends, ensuring a more agile, competitive, and secure financial market. 

For the European Union, time is running out. If it keeps on delaying the adoption of faster settlement times it exposes itself to be left behind the UK, which as we observe today is already positioning itself as one of the global leaders in financial innovation.

Investors of all sizes will undoubtedly obtain the true rewards from lower risk, increased liquidity, and a much more effective financial system. As global markets continue to pick in speed, we conclude that the future of trading securities will be measured in seconds rather than just profits.