To enhance its competitive edge, a report released on Thursday urges Britain’s stock markets to halve their share trade settlement time, achieving this goal by the end of 2027.
This recommendation, endorsed by the UK government, aims to align Britain with Wall Street’s advancements.
While exchanges in the United States, Canada, and Mexico will adopt a one business day settlement period, known as T+1, by the end of May—joining India and China—this will mean over half of the world’s equity markets will operate on T+1 or faster by year’s end.
This development increases the urgency for Britain and Europe to update their systems.
The European Union has expressed intentions to transition to T+1, though without a definitive timeline, and Switzerland is expected to follow suit.
The UK finance ministry initiated an investigation into reducing London Stock Exchange settlement times from two business days to one.
The resulting report by the Accelerated Settlement Taskforce highlighted a broad agreement within the industry on the necessity of moving to T+1 to preserve global competitiveness.
Taskforce Chair Charlie Geffen emphasized the importance of setting a deadline for the transition, noting both the significant investment required and the potential for cost savings and risk reduction.
“It just makes sense to have a timetable and a deadline. If you don’t have timelines, stuff doesn’t get done,” Geffen explained to Reuters, also acknowledging potential challenges similar to those faced by the US during its transition.
European asset managers have voiced concerns over the adequacy of time to secure dollars for U.S. stock purchases under the new regime.
The report, with contributions from consulting firm Accenture, estimated a yearly investment of $30-50 million over three years for each major financial firm to adapt to T+1 in the U.S.
Geffen proposed the formation of a technical group to outline operational modifications, like bank and asset manager back office automation, recommending completion by 2025 to prepare systems for a mandated switch by the end of 2027.
Britain’s financial services minister, Bim Afolami, affirmed the government’s support for the Taskforce’s suggestions.
The report also touches on the broader regulatory adjustments facing the UK financial sector post-Brexit, suggesting a collaborative effort with the EU and other European countries to synchronize the shift to T+1.
Nonetheless, if alignment within a reasonable timeframe proves unattainable, the UK is advised to proceed independently.
The technical group will also explore the feasibility of advancing towards instant settlement, or T+0, a concept deemed technically achievable today.