The European shift to T+1 is finally in our sights, an inescapable restructuring of the markets set to enhance global alignment and ultimately bring with it a sweep of benefits. But, as this massive shift for trading processes looms, it’s time to take a look eastward at what this change for Europe could mean for its APAC counterparties.
Earlier this year, the EU, Switzerland (CH), and the UK officially aligned on the proposed date for a shortened settlement cycle, with the region’s move to T+1 now set to come into force in October 2027.
While each jurisdiction is of course grappling with its own challenges in the lead up, this alignment between the European counterparts has sent a clear message across the industry – that when it comes to the undertaking of such a mammoth task, together is better.
Compared to the US shift, this is a different game, with many more markets to consider, exchanges to deal with, and complex market structure to navigate – resulting in an intricate, multifaceted task for both Europe and APAC. It’s clear this is a double-edged sword.
Speaking to The TRADE, Adam Conn, head of trading at Baillie Gifford, confirms that harmonisation with the EU and CH has been a key focus point when looking at the UK move to T+1, adding: “We also must look beyond [Europe] and view things globally […] Taskforces in the UK and across Europe will want to make sure that markets remain accessible.
“Hopefully most of the heavy lifting has already been done with the US move, but there’s going to be a need to ensure that deadlines are appropriate for Asian investors to be able to fulfil the needs for T+1 settlement.”
When it comes to innovation and the potential impacts of large-scale change, market players are accustomed to looking westward primarily – that is, to North America – a trend visible not just across the capital markets, but the world over.
However, when it comes to the flows between Europe and APAC, market participants are keen to take proactive steps to ensure this relationship is protected, making clear the value of the symbiotic activities between the two regions.
The cost of being out of alignment
There are two ways to look at the APAC conundrum when it comes to Europe’s T+1 shift – the effect on Asia trading in Europe, and vice versa.
In terms of the current state of play, Aaron Joel, equity sales trader at CGS International Securities Singapore, tells The TRADE that there is an increased flow from APAC into European markets being observed, explaining that this is “particularly in developed Europe as APAC clients seek to outperform their local benchmarks, which have not been as competitive on returns.”
“This trend highlights the growing importance of Europe as a destination for APAC-based investors.”
Andrew Douglas, chair of the UK’s T+1 Taskforce further echoes this sentiment, highlighting that “in the same way that Asia Pacific investors are important to the UK, UK investors and certainly American investors are important to Asia Pacific countries”.
As the buy-side was quick to point out from the off, there are definitely real costs associated with being out of alignment with not just neighbours, but also global counterparties. Though the US shift to T+1 was relatively painless in the end, ultimately this is a different beast.
When talks of a European shift began in earnest, the asset management community was keen for Europe to shift to one day settlement as soon as possible, with the Investment Association (IA) publicly pushing for a 2026 move.
Douglas explains that the buy-side was keen to bring this forward by a year due to dislocation from the US market proving a lot higher than anticipated.
“Relatedly, what you’ll see from an Asia specific perspective is their dislocation then from global markets might speed them up too, might speed the move up for certain jurisdictions anyway.”
Conn concurs: “It really comes back to the harmonisation point - we must find the date that works for everyone which is completely the right approach […] On the one hand yes, we thought let’s push for an earlier start but on the other hand, if we can get the rest of the region to move at the same time then that’s a win.
“If you’re an international investor the more markets that you have that settle at the same time the easier.”
The IA’s endorsement for a 2026 migration was based on the desire for a holistic shift – suggesting that in the event that jurisdictions are only able to transition at a later date, others should push theirs back to align.
This attitude speaks to the level of responsibility felt by European asset managers as pertains to their own processes that maintain quality in the capital markets.
Knowing me, knowing you
This importance placed on an inclusive international approach is arguably opposite to what occurred during the US shift, wherein then-chair Gary Gensler made clear that his mandate was focused on ‘300 million Americans’.
Conversely, Europe’s shift to one day settlement is one which is being driven by the need to stay open to investment. “Europe wants to keep the doors open,” says Conn.
This of course includes recognising that APAC is an important source of inward investment for both the UK and the EU.
Douglas explains: “From our side what did we do to try and accommodate that? What I believe to be a pretty elegant solution in that working closely with Euroclear, we have included a cut off of sorts aimed specifically at UK investors outside of the UK time zone – a sort of nominal time at which Euroclear would expect instructions to have been received – which is 5:59am on T+1.
“From our perspective, everybody who is east of us benefit from that because they’ve got their working data […] all in all I think we’ve done a pretty good job of keeping the market available for Asia Pacific investors.”
Indeed, this approach will allow for many Asian jurisdictions to begin work and have a full business day to manage processes in time for Europe’s T+1 settlement – giving investors the opportunity to get everything in place across the different time zones.
“To be honest, I didn’t want to go down in city history as the man who shut the UK off to Asia Pacific investors. That was not how I saw my legacy [playing out],” Douglas adds.
Settle up!
When it comes to the new settlement status quo, time is literally of the essence, but what does this mean empirically? It’s all well and good aiming for a collective process, but the pain points endure.
As Pam Samrai, head of buy-side post-trade product at Bloomberg, explains: “Where I foresee challenges is European counterparties will want to automate and ensure straight through processing to ensure that they settle and match to the T+1 window ideally same day. APAC will likely adopt a similar approach.”
In the same vein, speaking to the current state of play when it comes to European versus APAC settlement dynamics, Joel asserts that while European settlement processes are relatively straightforward, the situation in Asia is “markedly” different.
“APAC markets face a range of failures and penalties related to settlement delays. As a result, our APAC client base is highly focused on settlement efficiency due to the current regulatory environment, and they are well-prepared to manage these challenges.”
“[…] In Asia, there is a strong commitment to meeting settlement deadlines, which is largely driven by the time zone differences. After the Europe market close, local APAC middle-office teams ensure matching instantly after an order is completed to avoid any settlement delays into the second day. They maintain a relentless focus on matching or settling trades, underscoring their proactive approach.”
Jon Ford, head of fixed income business development at Pirum, explains how this plays out in practice has already become increasingly pre-emptive.
“So much of Asian trading interacts with London and New York. The time zones create a lot of inefficiency in that some time zones are already putting up collateral a day early to receive collateral back ‘tomorrow’.”
There is of course, understandably, a clear correlation between the emphasis on proactive preparation and APAC’s market structure wherein firms are risking significant penalties if cut-offs are not met.
James Pike, chief revenue officer at Taskize, tells The TRADE: “Asia-based market participants need to implement the ability to ‘pass the book’ internally to other operations teams so issues don’t persist beyond the end of the trading day.
“This is a vital part of the wider securities settlement picture that needs to be looked at much closer between now and the 2027 deadline to ensure settlement fails costs don’t increase further.”
Added to this, is the continually increasing globalisation of trading activity which exacerbates those key points of diversion across jurisdictions, thanks to fragmentation and the different currencies at play.
Duncan Carpenter, director of product management, Pirum, highlights one factor potentially affecting secondary markets, explaining: “If you’re selling against different [currencies], you’ve now got different time frames in Asia versus your European assets for example.
“You’ll therefore have part of your trade on a T+1 basis, and part on a T+2 basis, and that’s a more direct challenge which they’ll need to deal with.”
Better said, the time for preparations is nigh, with operational questions including upping tech stacks needing be considered as a matter of urgency. But what is also up for debate is the potential for a change in the hours being worked in APAC.
Though firms look to do as much as they can with what they have, invest where needed in the right technology, and keep a finger on the pulse of new requirements, the inescapable fact remains that in the trading world, a human touch is mandatory.
Samrai tells The TRADE: “An operations manager, regardless of geography, will want all trades matched and settled by end of the day before they go home and if this is not possible, the next question is about whether we see a shift to extended operational hours to support and facilitate trading desks in those regions.”
Joel highlights that work cultures are distinct across regions and play a critical role. Key disparities are seen even within his own firm, he explains: “For instance, our local offices in the [APAC] region operate well beyond typical working hours, with teams still online at midday UK time, which is significantly later in the day for them.
“This contrasts with the situation in London, where many operations teams conclude their workday by 5pm. In APAC, however, there is a strong commitment to ensuring settlement risk is minimised, and this cultural difference significantly contributes to operational efficiency.”
Tying this into the shift to T+1, it’s clear Asian firms are already bearing some of the brunt of current settlement requirements, with things only set to get tighter.
As Carpenter explains: “When it comes to the shift, if your current solution for currency differences is having a few extra headcount managing the process, then part of the challenge will be that they will be losing some of the working day. The condensed time frame when moving to T+1 is likely to make such manual solution a less viable approach going forward.”
In Asia Pacific, it is more common to see upping headcounts as a fix for increased operational tasks due to cost pressures given that the price of labour is generally lower, depending on jurisdiction. However, the hunt for more workable solutions, as this delicate task of aligning continues, is on.
As Samrai explains: “Clients are increasingly reviewing their processes […] transitioning towards automation to improve operational controls and efficiencies to eliminate errors from manual elements – human error.
“[…] Not all firms are made equal and so it’s the smaller players that perhaps are still relying on manual processes and have not invested in automation and technology who might need to assess their capabilities to meet T+1 timelines.”
The third mover advantage?
The other side of the coin of course, is not how APAC and Europe deal just with Europe’s shift to T+1, but the arguable inevitability of an Asian switch to T+1 too.
“We always talk a lot here in the UK about second mover advantage […] we’ve been able to make adjustments to our strategy to take advantage of that knowledge. Therefore, APAC will have a sort of third mover advantage because they will have seen what works in all the other markets,” says Douglas.
“[…] The Asia Pacific markets are quite intertwined and I’m sure once one of them decides to go, the others will think they should probably look to do the same.”
Currently, Australia and New Zealand are widely expected to move in 2030, while others like India have already made the shift to T+1. HKEX also recently confirmed that plans are in to be “technically ready” to support a T+1 settlement cycle by the end of 2025.
Rob Arnott, head of brokerage, APAC at Northern Trust tells The TRADE that from an Australasia point of view: “For any AU/NZ clients currently doing processes early on T+1 local time to cover US market close, [it] will be pretty much impossible to meet the UK/EU timelines which are two to three hours earlier, which further promotes the need for either a global footprint, or to outsource to firms who have one and can meet regional cutoffs.”
He adds: “Preparedness is absolutely key, and as with markets that have transitioned there will need to be changes. However, the progression towards T+1 is increasingly a well-trodden path.”
Emerging markets are also expected to follow suit in the subsequent years to come, however a staggered approach is anticipated.
“We’ll see regional differences. I don’t envisage that all countries in APAC will transition to T+1 within the same time frame,” says Samrai, who reminds that at the end of the day “the ability to manage T+1 settlement timelines is not ‘an APAC problem,’ but dependant on the sophistication and investment in technology by clients across the board”.
“The message that we are seeing from regulators globally is very consistent, which is that technology and automation are going to be key to manage the transition to T+1.”
The inevitability of progress
In the end, T+1 is inevitable across the competitive world of investing; however, progress must be worked on. Through the consideration of key divergent points – differing approaches to operational challenges, cultural disparities, cost restraints, regulatory differences, currency discrepancies, or the all-important fragmentation aspect – Europe and APAC are set to reap the rewards of cooperation.
As Basu Choudhury, head of trade lifecycle strategy at OSTTRA explains, ultimately: “As the EU and UK moves towards T+1, Asia-based investment managers will need to implement alternative solutions for funding the purchase of stocks or identify alternative liquidity sources”.
And with this in mind, “the devil will be in the detail,” affirms Samrai, “it always is.”
Indeed, the cost of being out of alignment is high for both sides, but with decisions demonstrably having already been made with APAC in mind, it appears that the symbiotic relationship between Asia, the UK and the EU is being not just considered but protected.
Ultimately, the collaborative approach to change, the want to understand the challenges faced on the other side of the trading screen, and the pursuit of holding doors – and subsequently the world – open looks seemingly set to prevail.