The Network Forum 2025: FMIs – Providing Much Needed Stability During Turbulence

In two years, T+1 will be live in Europe.

Speakers at TNF warned that not only does the industry need to transform its legacy operating model, but it must also avoid becoming complacent. While the introduction of T+1 in North America went ahead without much incident, the transition was not easy by any stretch. Published shortly after T+1’s adoption in North America, a Citi Securities Services white paper highlighted that 44% of financial institutions said they were significantly impacted by T+1, up from 28% in 2023, suggesting a lot of firms found the implementation harder than expected. One panelist shared that if North American firms struggled with T+1, then Europe is in for a rude awakening, on account of its fragmented capital markets, arbitraging regulations and complex FMI ecosystem. 

To ease the burden of T+1, Francisco Béjar Nuñez, Head of CSD Services, SIX, urged European firms to start preparing for the changes now. “Firms cannot afford to wait until 2026 to begin getting ready for T+1. Shorter settlements affect almost everything in the securities value chain, from trading through to custody, settlements and clearing,” said Béjar.

While increasing operations headcount will paper over some of the cracks during T+1, it will only get firms so far, with Speakers at TNF stressing that automation is the only real long-term solution.

 “The rollout of T+1 is an opportunity for financial institutions to automate whatever processes they still have running on manual. When T+1 takes effect, it will be very difficult to perform certain activities, i.e. exceptions management, if you still rely on manual intervention,” said Béjar. 

Béjar continued:  “Firstly, firms need to get their technology change budgets in shape. Once that is done, automation has to be carried out at an internal level. Manual processes need to be rooted out across the organization, from the front office right through to the back office. It is also important firms work with end clients on improving their own automation. If a client is sending you instructions via email or fax, for example, then this will cause problems when T+1 goes live.”

Not only will automation enable financial institutions to comply with T+1, but it will put them on a strong footing for when T+0 -  or even instant settlements – come into fruition.

Greater industry standardization will also help make the T+1 transition more palatable. “Standardization could be achieved through adopting the ISO 20022, and this is something Swift is strongly promoting,” continued Béjar.

During the panel, there were calls for the industry to embrace the Unique Transaction Identifier (UTI) ^[1], a reference code and part of the ISO staple, which supports end to end tracking of securities transactions. The UTI, which is already used in the reporting of derivatives and securities financing trades, could make it easier and quicker for firms to identify issues in the transaction lifecycle before they turn into fails. In a time-constrained T+1 ecosystem, this could help trading counterparties reduce the number of fails, and with it avoid the harsh Central Securities Depositories Regulation (CSDR) penalties.

“The UTI is a good idea, and there is a lot of debate happening in the industry about adopting it further. Despite this, I do not think enough of the industry will be using the UTI when T+1 comes into force in 2027,” said Béjar.

^{[1] Swift-  The Unique Transaction Identifier and its value in securities settlement}
 

Given how many trade fails are a direct consequence of inaccurate Standing Settlement Instructions (SSI), some are pushing for the creation of a golden SSI- namely, a single harmonized process of sending SSIs using homogenous data formats.

“A golden SSI is a perfect idea in theory but whether it is feasible in reality is questionable, mainly because of how fragmented the market is,” said Béjar.

If T+1 is to be successful, FMIs need to get the simple things right, but some providers are falling short.  “Not all European CSDs offer partial settlements, which is a basic functionality. Europe’s CSDs need to get the basics right first, before they start talking about adopting UTIs and golden SSIs. The good news, however,  is that both Switzerland and Spain are making excellent progress towards becoming T+1 ready, with the latter having updated  its post-trade infrastructure following the rollout of a recent Spanish post trade reform,” commented Béjar.

TNF took place amidst a backdrop of challenging global events. 

During TNF, a number of network managers made it clear that the resilience of Financial Market Infrastructures and other intermediaries, such as sub-custodians, is their biggest concern right  now. Despite the prevailing geopolitical uncertainty and market volatility, CCPs continue to be the benchmark for excellence in operational resilience.

“CCPs have repeatedly proven that they are robust and their safeguards work. There has not been a CCP default since 1987. This is in part thanks to the fact that CCPs are highly regulated and need to comply with extensive liquidity, capital and resilience requirements,” said Laura Bayley, Head Clearing Services, SIX, speaking during TNF.

She continued: “Over the last few decades, starting with the 2008 Global Financial Crisis, which saw a large clearing member default, as well as more recent events such as Covid, the Russian invasion of Ukraine and US trade policy decisions, CCPs have demonstrated they have these risks under control, something which is also confirmed by regular European Securities and Markets Authority (ESMA) stress testing. More recently, CCPs were put to the test by the massive power outage across Spain in April 2025, a challenge which they managed to weather successfully.”

The panel also highlighted CCPs are operating within a complex regulatory framework, particularly following passage of the European Market Infrastructure Regulation 3.0 (EMIR 3.0). 

Together with introducing active account requirements,  EMIR 3.0 also contains provisions aimed at making the regulatory approval process easier for CCPs when adjusting their risk models or launching new products. “We had a change earlier this year with our Spanish CCP, which we submitted under the accelerated procedure introduced under EMIR 3.0, and we received our answer within the allotted two week period. But, I wonder as the pressure of the new procedures wears off and as prescriptive rules under the Level 2 regulation come into effect, if it will continue to be as smooth,” said Bayley. 

The EMIR 3.0 Level 2 measures detail the approval process for new CCP products, but some of the contents in the text have raised red flags in the industry.

“The draft text was concerning and most CCPs agree that the current proposals would make the authorization of new CCP products more difficult, burdensome and potentially slower. We firmly believe that a faster time-to-market for new products, particularly those which do not introduce material changes to the CCP’s risk profile, could reduce regulatory bottlenecks and enable CCPs to respond more flexibly to client demand,” said Bayley.
 

At the same time, EU regulators should not give up on their harmonization efforts.  Rather than forcing the market into single liquidity pools to eliminate fragmentation, Bayley urged EU regulators to standardize the legal framework across the EU-27, so as to reduce settlement risk and improve cross-border collateral mobility, something which would result in firms pooling liquidity organically in the markets where there are the most efficiency benefits.

Similarly, the EU’s Savings and Investments Union (SIU), previously known as the Capital Markets Union (CMU) contains some promising features.

On stimulating investment through pension fund reform and increasing retail investor participation in equity markets, Bayley said it would help expand the capital base available to FMIs. She also noted the SIU’s focus on resolving data fragmentation and bolstering transparency across OTC and systematic internalizers trading could empower FMIs to better anticipate – and ultimately respond to – liquidity demands, especially during periods of stress.

Europe’s rollout of T+1 in 2027 is going to impact FMIs profoundly, some of whom may have to implement highly complex and costly systems upgrades. Meanwhile, EMIR 3.0’s plans to streamline the approval process for CCPs when launching new products and refining their risk models is a positive development,  but the finer details contained within the Level 2 text have sowed a lot of alarm within the industry. Together with the unpredictable market conditions, post-trade reforms and regulatory changes are both going to put huge pressure on FMIs across Europe.

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