EU regulator proposes shortening trade settlement times from October 2027

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EU regulators have recommended the bloc shorten the time it takes to finalise stock, bond and fund trades from October 2027, setting the region up to align with the UK’s plans to upgrade its capital markets.

The European Securities and Markets Authority on Monday proposed the date of October 11 2027 for the move, as it seeks to modernise and boost liquidity on its markets at a time when policymakers are urgently seeking to re-energise the region’s capital markets.

The suggested date comes as EU authorities seek to align their move with that of the UK, which is also targeting October 2027 — although UK officials are yet to propose an exact day.

Europe’s discussion on settlement times comes after the US in May shortened the window for finalising trades in an attempt to modernise markets, increase liquidity and minimise the risk of failed trades.

Settlement is the typically mundane but important process of matching and legally transferring assets from sellers to buyers. Outside of North America and India, it typically takes place over two days.

The activity was thrust into the spotlight during the US meme stock mania at the peak of the Covid-19 pandemic, when some brokers including Robinhood blamed the two-day settlement window for their systems being unable to keep up with the volume of trading.

Subsequently, the US, Canada and Mexico made the move from two-day to so-called T+1 settlement for stocks, bonds and exchange traded funds. The UK is also set to move to one-day settlement by October 2027, while India cut its settlement time last year.

Esma said shortening the settlement window from two days to one will result in “settlement efficiency in the EU, contributing to market integration” and add to policymakers’ attempts to re-energise the region’s fragmented capital markets.

Traders, asset managers and industry bodies had urged EU officials to align the bloc’s timing with the UK in order to ease the move, warning that switching at different times would lead to unnecessary complications and costs.

Esma said it was recommending October 11 2027 because November or December would be near the holiday periods, and there were “challenges linked to the first Monday of October”, which is just after the third quarter ends.

The EU’s patchwork of numerous clearing and settlement houses makes its transition to single-day settlement likely to be more complex than the UK and US moves.

“The complexity of a trading and post-trading environment . . . means that this project will require a specific governance to be put in place,” Esma said.

The final deadline for the shift will be made after approval from the European Commission and the national central banks of EU member states.