T+1 in Europe: Turning change into an opportunity

In the third instalment of our new series of insights, we look at how T+1 could transform Europe’s capital markets for the better. 

On October 11, 2027, the EU, the UK and Switzerland will become the latest markets to adopt T+1 for securities settlements. Although the rollout of T+1 will generate added costs and a certain degree of extra risk for financial institutions, it could also unlock a number of strategic benefits.    

So, how can financial institutions make sure that they get the most out of T+1? 

Cashing in on T+1 

Moving from T+2 to T+1 does have its drawbacks, with the most obvious being that banks and brokers will have much less time to complete their post-trade processing activities.  

But, the transition does have some positives.  

Losing an entire day from the post-trade settlement process means that financial firms will incur less credit and counterparty risk, which in turn could translate into significant margin savings.   

“In a T+1 settlement system, the margining requirements will be reduced for trading counterparties. This is because firms need to collateralise pending trades with their Central Counterparty Clearing Houses (CCPs) on a daily basis. So, if you take one day out of that trading lifecycle, then that is one less day that you will have to collateralise your trades at the CCP,” according to James Pike, Chief Revenue and Business Strategy Officer, at Taskize.  

Having gone live with T+1 in May 2024, the amount of margin being posted on equities trades in North America has already fallen exponentially. For example, a report published by the Depository Trust & Clearing Corporation (DTCC) in September 2024 revealed that the NSCC’s own Clearing Fund had fallen by $3 billion – or 23% – to $9.8 billion since T+1 came into play, down from the previous three-month average of $12.8 billion in a T+2 environment.   

“As a result of these margin savings, firms across the value chain can better optimise their collateral, allowing for liquidity to be freed up even further,” said Pike.  

The pivot towards T+1 will also help incumbent banks deal with the eventual transition towards digital asset trading, which experts believe will operate either on T+0 or on an instantaneous settlement basis.   

“Adoption of T+1 will bring the traditional finance industry closer to what happens in the crypto-currency and digital asset world. If we can handle T+1, then we should be able to manage T+0. If we can settle trades on a same day basis as a normal and regular course of business at scale, then this will put the industry in good stead when it comes to supporting digital assets, such as tokenised securities,” continued Pike.   

And finally, T+1 may be adding to people’s overheads, but it is ultimately helping financial institutions future-proof their organisations by forcing them to embrace automation and make much needed upgrades to legacy technology stacks.   

However, overhauling operations is something which is often easier said than done.  

Getting outside help 

According to Pike, “As T+1 inches closer, the industry is looking for solutions, and this is where providers such as Taskize are playing a key role.” 

Taskize has a proven track record of delivering better automation at firms, allowing businesses to replace email and manual workflows with something more seamless. Not only does this reduce the chances of human errors at firms, but it also expedites operational processes, which ultimately makes things a lot easier for customers.  

In fact, 96% of clients said they are happy when using Taskize in their workflows, versus 81% who said the same thing about email. 

The platform’s real-time data analytics is also having a material impact on settlement efficiency, which is making life easier for banks, brokers and their end clients.   

For instance, firms leveraging Taskize’s solutions are reaping major efficiency benefits.  When using Taskize, Euroclear’s Client Services Team was able to resolve 70% of one leading bank’s settlement queries in less than two hours over a 13-month period, compared to 24% when communications were carried out over email.  

The number of queries being solved for a separate client also jumped by 40%, again, a direct result of Euroclear’s adoption of Taskize.   

When deploying Taskize, half the number of users at this particular client were able to raise 40% more queries than what they would have done had they just relied on email. As a result, Taskize usage generated an additional 32% extra capacity at the client.  

By reducing the number of client-reported issues related to settlement delays and processing Standing Settlement Instructions (SSIs) much faster, counterparty relationships are being steadily improved. Through cost savings and scalability, both of which can be enabled via automation, firms will be able to grow their businesses more easily and quickly.  

All of this makes for a much better user experience.