A shift to T+0 is likely to initially complement T+1, rather than replace it, say experts

With the countdown to T+1 in Europe on, panellists speaking at the Fixed Income Leaders Summit in Amsterdam, considered how likely a subsequent move to instantaneous settlement is, and how the industry might get there.

While European markets are occupied with the imminent move to T+1 settlement at present, an eventual shift to T+0 is not completely out of the conversation, confirmed expert panellists at FILS on 16 October.

Nina Suhaib-Wolf

Plans for the move to T+1 settlement are well underway across Europe following alignment on a proposed date for the shortened settlement cycle – set for 11 October 2027 in the UK, EU and Switzerland.

Compared to the US shift, Europe’s own transition is a decidedly different game, full of diverse jurisdictions, exchanges, and complex market structure – but attention is also being paid to what will come next – a potential for immediate settlement.

Speaking to this, Nina Suhaib-Wolf, director, market practice and regulatory policy, ICMA, affirmed that though her own fintech teams are “really engaged” in the notion, long-term plans for the move will be highly tech-driven and likely to emerge steadily, rather than through a sudden shift.

“T+0 is somewhere on the horizon, it’s a question of whether it would come with a big bang or more gradual move and maybe to complement existing processes […] whereas T+1 is really to improve existing settlement processes and make them more efficient, T+0 would really mean introducing new product digital ideas.”

Other panellists echoed this notion, highlighting both the potential of new innovations when it comes to digital products, and the possibility of leveraging other technologies in order to facilitate processes, such as blockchain.

Sven Rudolf, head of trading at Oddo BHF Asset Management, further added that current limitations in other markets are proof that the industry is not ready for T+0 adoption in full, with technological developments set to determine asset readiness on a class-by-class basis.

“I think it’s a question of tech, of blockchain, of really just getting it going. In general we have T+0 already in the future market because normally a future trades T+0, but does it always work? Everybody knows that it doesn’t always, it’s much more T+1. This demonstrates that it’s not there yet.

“So, if you want to replicate it for the whole market, there will still be some which will not trade T+0, and you have to consider them. Let’s see how the tech develops first is my point of view, then you can see which assets you can put on this T+0 journey and which ecosystems can do it.”

Overall, panellists recommended a cautious approach, balancing innovation, proactivity, and careful consideration of the empirical market state of play.

Speaking to this pragmatic view, Christopher Bonnet, deputy director of data and supervision, AMF, said: “When I think about T+0, I think about someone running really fast […] This is something that, even if we can do, we have to be cautious about and question whether it’s really adding value, or if it’s just ‘adding’.”