How and Why Trade Settlement Gets Shorter and Shorter

Settlement is the process by which the buyer receives the security and the seller receives the cash. Currently, it takes two business days (known in the industry as T+2) to settle a trade.

The shortening of the settlement cycle to just one business day (T+1) aims to speed up how trades are finalized and reduce risk in the system. This, in turn, strengthens the efficiency and competitiveness of post-trade financial market services in the EU.

In the early days of modern securities markets (mid-20th century and earlier), settlement periods were quite long – often five business days (T+5) or more. This was due to the manual, paper-based nature of trading. Physical stock certificates had to be delivered. Payments were processed via checks. Back-office systems were coordinated by mail or phone.

With the advancement of electronic trading, back-office automation, and centralized clearing through organizations like the Depository Trust & Clearing Corporation (DTCC), the US and many other markets transitioned to a T+3 cycle in the 1990s. This three-day period was seen as a balance between operational feasibility and reducing credit and counterparty risk.

The EU moved to T+2 in 2014 as part of regulatory reforms after the 2008 financial crisis (e.g., the CSD Regulation). The US followed in September 2017, citing benefits like reduced risk exposure and greater harmonization with global markets. Other jurisdictions, such as Australia, Hong Kong, and Canada, also adopted T+2, making it the new global standard.

From then on, the consensus was that a T+2 cycle was appropriate. From a risk perspective, the two-day gap between trading and settlement was not an obstacle because of the role of clearing houses. The two-day window also allowed middle and back-office processes to be completed in time, including cross-border settlement.

Europe had to react. Authorities needed to evaluate the pros and cons of moving to T+1 and consider the effects of having different settlement cycles across the Atlantic.

On February 12, 2025, the European Commission published a proposal to shorten the settlement cycle for EU securities from two days to one. This would be done through a targeted amendment to the Central Securities Depositories Regulation (CSDR). The proposed transition date is October 11, 2027.

From that date, most securities will settle one day after the trade instead of two. This change sounds simple, but it requires a fundamental rethink of post-trade operations across borders, time zones, and institutions.

This timeline gives market participants time to develop, test, and agree on processes and standards. The goal is an orderly and successful introduction of T+1 in EU capital markets.

On June 30, 2025, the EU T+1 Industry Committee released a High‑Level Road Map report. It was prepared with ESMA, the European Commission, and the European Central Bank. The report gives non-binding recommendations on key operational areas such as process automation, trade matching, cut-off time harmonization, and governance structures.

It stresses the need for pan-European coordination to tackle technical, legal, and cross-border challenges. While not regulatory, the document is meant to guide industry readiness and support future legislative action related to CSDR changes.

The report’s release was followed by a launch event on July 3, 2025, in Brussels, hosted by the EU T+1 Industry Committee with key EU institutions.