Markets in Europe – the UK, EU, Liechtenstein and Switzerland – face significant challenges related to cost, complexity and level of readiness as the date – October 11 2027 – set for implementation of a move to a shortened one-day trade settlement ( T+1 ), gets closer, according to a recent report

Notably, there have already been operational issues and subsequent failures that have resulted in significant costs, including financial penalties related to the Settlement Discipline Regime, finds the Tackling Post-Trade Friction: Supporting a Global Shortened Settlement Cycle report, published by Firebrand Research, Clearstream, the Depository Trust & Clearing Corporation and Euroclear, which takes an in-depth look into industry preparations for the move to T+1 and is based on interviews with operations and technology teams representing 45 firms from the asset management, custodian, bank and brokerage communities.

The research reveals that 71% of interviewee settlement failures in 2024 were caused by counterparty shorts and 21% caused by data issues, which include incorrect or stale standing settlement instructions ( SSIs ).

As well, an average of 83% of interviewee firms’ equity flow, the report points out, goes through automated central trade matching and an average of 71% of fixed income flow, but more automation is needed.

Improved operational processes and automation between post-execution trade matching and pre-settlement matching at the central securities depository, the report urges, is necessary to eradicate mis-match issues relating to SSIs and place of settlement ( PSET ) that cause trade failures.

And firms active in the European markets face issues regarding the timely sharing of accurate and detailed settlement data and differences in custodian and financial market infrastructure ( FMI ) and custodian market practices.

Interviewees’ greatest concerns about the European move to T+1, the report reveals, relate to a potential misalignment in implementation across the region, foreign exchange misalignment, PSET matching and incorrect SSIs.

As a result of market differences across the region, the report shares, the move to T+1 in Europe will be a more complex and costly process than it was for North America, involving larger teams to deliver a smooth transition working with the higher number of FMIs, regulators and markets involved.

The costs of North American T+1 projects, the report highlights, were dominated by full-time employee hours and investment in automation, a proven critical enabler of T+1 settlement. Further, the responsibility of client engagement and education sat largely with custodians, asset servicers and FMIs, with core teams at sub-custodians and global custodians ranging from five people to more than 100 globally.

“The European move to T+1 is undoubtedly much more complex from a planning and implementation standpoint than the North American transition,” says Virginie O’Shea, Firebrand Research’s founder. “Not only are there more currencies and market infrastructures, participants and regulators involved, there are also significantly different market practices to accommodate.

“However, the research also shows that valuable lessons have been learnt in previous moves to shorten the settlement cycle, such as the benefits of early testing and strong governance.”