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Britain will join the global move to cut the time to settle stocks and bonds at the end of 2027, a year later than originally planned after pushback from businesses with EU interests.
A government-backed report on Thursday said the UK financial industry should finish preparations for a change to next-day settlement by the end of 2025, with a full switchover completed two years later.
The timetable marks a breakthrough after disputes between banks and asset managers over the deadline, with some institutions preferring to move as soon as possible and others preferring a slower approach to align with the EU.
Settlement is a typically mundane but critical activity that underpins global securities markets. It involves confirming trades, and legally transferring assets between buyers and sellers.
The UK has been keen to join a global push, led by the US, to shorten settlement times from two days to one, to cut risk and boost liquidity in markets. From late May, the US, Canada and Mexican markets will move to single-day settlement while the EU is assessing the timing of its own move. India made the move last year.
City minister Bim Afolami said “keeping the UK at the forefront of technological change is critical to maintaining our competitiveness”.
The government-appointed task force had pencilled in a provisional switchover date of 2026, but was forced to change when it became clear that some banks would not “informally approve” the earlier deadline as they wanted to align with the EU, two people with knowledge of the discussions said.
The task force recommended that the UK should be “ready for a full transition by the end of 2027, while taking a pragmatic approach that allows the UK to adapt to global developments”.
Charlie Geffen, chair of the task force, said the decision was “pragmatic”. “Obviously, there’s been a bit of a debate about the pace but that’s to be expected,” he said.
Adam Farkas, chief executive of bank industry body AFME, said the report “does not identify any material advantage for UK capital markets to move to T+1 out of step with regional partners” and urged EU officials to synchronise the timing of their move with London.
The single-day settlement window will require banks, brokers and asset management companies to upgrade their back and middle-office processes to finalise trades more quickly.
The US Securities and Exchange Commission warned American firms on Wednesday that it was “critical” to prepare for the shortened settlement cycle that comes in at the end of May. “No doubt there’ll be some teething issues [in the US transition]”, from which the UK must learn, Geffen said.
Ellesheva Kissin is a reporter at Banking Risk and Regulation, a service from FT Specialist
