The European Securities and Markets Authority (ESMA) has published a statement highlighting key deadlines and action points to be ready for the transition to a T+1 settlement cycle in EU financial markets.

On 11 October 2027, the EU financial markets will move to a T+1 settlement cycle. The implementation of the changes required for a smooth transition to T+1 must therefore be a key priority for EU market participants in 2026.

The legal and regulatory framework needed for the transition to T+1 has been known since mid-October last year. As a next step in the process towards T+1, ESMA proposed amendments to Commission Delegated Regulation (EU) 2018/1229 to set new requirements, which are particularly relevant for the transition to T+1. These amendments have now been endorsed by the European Commission, and currently are under scrutiny by the European Parliament and the Council.

Firms should consider these new requirements in combination with the recommendations of the EU T+1 Industry Committee4, and accelerate the technical work needed to prepare for the transition to T+1 settlement on 11 October 2027.

Market participants will have to be fully compliant by the following deadlines:

• First deadline: 7 December 2026, with the requirements to improve the first post-trade step, the exchange of allocations and confirmations, in terms of timing and through the default use of international communication standards.
• Final deadline: 11 October 2027, with the requirements to optimise the settlement layer, including sending instructions early enough to securities settlement systems, and the generalisation of certain functionalities in CSDs, such as auto-partial settlement, hold & release, and auto-collateralisation.

ESMA and NCAs are in the last stages of their review of the Level 3 guidance on allocations and confirmations.

Automation and standardisation are essential, so firms are encouraged to review all their trading and settlement processes and where relevant, to consider new partnerships. Ensuring data quality in a timely manner is also important, such as using the correct reference data (e.g. PSET, PSAF, transaction type, place of trading, etc.), including through Standard Settlement Instructions.

Insufficient preparedness among market participants could trigger significant operational and reputational risks for the market participants concerned. These can include flawed interdependencies with financial market infrastructures and IT providers, inability to meet client demands, and higher IT and training costs stemming from last-minute remediation efforts.

Ultimately, a persistent inability to meet T+1 settlement deadlines and other requirements could reduce the willingness of counterparties to trade, as they seek to avoid the operational risk of late settlement and associated settlement discipline measures.