COMMISSION STAFF WORKING DOCUMENT Accompanying the document Proposal for a REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL amending Regulation (EU) No 909/2014 as regards a shorter settlement cycle in the Union
Date: 2025-02-12
Institutions: Directorate-General for Financial Stability, Financial Services and Capital Markets Union, European Commission
Subjects: financial control, financial institution, financial instrument, financial legislation, financial transaction, liquidity control, sales agent, securities

EN 

  EN 

   EUROPEAN COMMISSION  Brussels, 12.2.2025  SWD(2025) 37 final  COMMISSION STAFF WORKING DOCUMENT Accompanying the document Proposal for a  REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL amending Regulation (EU) No 909/2014 as regards a shorter settlement cycle in the Union                 {COM(2025) 38 final}  
 
 
 
 
 
 
 
 
 
 
 
 
 
1.  INTRODUCTION  

The EU needs to do more to unlock the financing necessary for the digital, green and social 
transition as well as to boost growth. Efficiently functioning and deep capital markets are a 
necessary condition for achieving that goal. However, EU capital markets remain fragmented 
despite substantial efforts to integrate them over the years; this fragmentation is a substantial 
impediment  to  their  development.  This  has  been  confirmed  by  a  number  of  reports  during 
2024, including the Draghi report1 and the Letta report2. These reports, as well as the Noyer 
report3, also underline that the competitiveness and attractiveness of EU capital markets, and 
their ability to deliver the financing that the EU needs, can only be achieved if those markets 
embrace innovation. 

The Savings and Investments Union (SIU) needs to be built on efficient and  safe post-trade 
services. These services play a key role, amongst  other things, in the issuance of securities, 
finalisation  of  trades  (settlement),  keeping  track  of  the  ownership  of  securities  as  well  as 
managing and reducing  risks (clearing). Post-trade services are essential for the functioning 
of  EU  capital  markets.  For  these  reasons,  all  aforementioned  reports  have  emphasised  that 
more needs to be done to improve the efficiency of post-trade services. 

The settlement of securities - the process through which the buyer receives the security and 
the  seller  receives  the  cash  -  is  at  the  core  of  capital  markets.  Each  day,  more  than  EUR  4 
trillion  of  securities4  are  settled  in  EU  central  securities  depositories  (CSDs).  The  longer 
settlement  takes  (i)  the  longer  the  risks5  faced  by  buyers  and  sellers  last;  (ii)  the  longer 
investors have to wait to receive the money or the securities they are owed – if the settlement 
does not fail; and (iii) the more that opportunities to enter in other transactions are reduced. 
Fast,  efficient  and  reliable  settlement  is  therefore  an  essential  pre-condition  for  developing 
the SIU. 
It  has  now  been  ten  years  since  the  Central  Securities  Depositories  Regulation  (CSDR)6 
entered into force and harmonised the securities settlement cycle in the EU at a maximum of 
two  business  days  after  the  trade  date  (so-called  ‘T+2’)  for  certain  secondary  markets 
transactions.7  Since  then,  financial  markets  and  technology  have  continued  to  evolve. 

1   In the report on the future of European competitiveness reducing capital market fragmentation is the number 

one objective set for the SIU, p.292. 

2   The  report  “Much  more  than  a  market”  or  commonly  called  the  “Letta  report”  stresses  the  need  for 

innovative and efficient capital markets to achieve the financing of the green and digital transitions.   

3   The  report on  developing  European  capital  markets  to  finance  the  future, or  commonly called  the  “Noyer 

report” details the challenges to overcome in order to unlock EU capital markets potential.  

4   Data  generated  through  the  Securities  Trading,  Clearing  and  Settlement  Statistics  Database,  European 

Central Bank, https://sdw.ecb.europa.eu/browse.do?node=9691131 for the year 2023. 

5   A  counterparty  to  a  financial  transaction  is  exposed  to  different  type  of  risks  such  as  credit,  liquidity  and 

market risks between the trade and the settlement of such a transaction.  

6   Regulation  (EU)  909/2014  of  the  European  Parliament  and  of  the  Council  of  23  July  2014  on  improving 
securities settlement in the European Union and on central securities depositories and amending Directives 
98/26/EC and 2014/65/EU and Regulation (EU) No 236/2012 OJ L 257, 28.8.2014, p. 1–72. 

7   The scope of T+2 settlement in CSDR is transactions in transferable securities which are executed on trading 
venues. Transactions in transferable securities that are negotiated privately but executed on a trading venue, 
executed bilaterally but reported to a trading venue or the transactions where the transferable securities are 
subject to initial recording in book-entry form for the first time (i.e. primary market transactions) are not in 
the  scope  of  T+2  settlement.  Indeed,  primary  markets  involve  non  standardised  transactions  that  require 
specific  processes  and  monitoring.  Introducing  a  mandatory  settlement  period  for  such  transactions  in 
parallel to the move to T+1 would require a broader analysis as well as market consultations that would not 
be possible to perform given the need for quick clarity on a transition to faster settlement in the EU. In this 
respect, during a meeting with Member States on 5 September, many Member States were open to exploring 

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Following  the  EU  move  at  the  end  of  2014,  many  jurisdictions  followed  and  moved  to  a 
shorter settlement cycle; for example, the US moved to T+2 in 2017. But innovation and the 
need to improve the efficiency of settlement, to increase competitiveness as well as to reduce 
risks  to  financial  stability,  have  meant  that  efforts  have  not  stopped  there.  The  rest  of  the 
world has already moved on since then: China, India, the United States and Canada, to name 
but  a  few,  have  all  shortened  their  settlement  cycle  further,  to  a  maximum  of  one  business 
day  after  the  trade  date  (so-called  ‘T+1’).  Significantly,  the  global  shift  to  T+1  is  creating 
financial  markets  and  creates  potential 
misalignments  between  EU  and  global 
competitiveness  gaps  for  EU  capital  markets.  These  misalignments  will  only  increase  the 
more countries will move to T+1.  

The  most  recent  review  of  the  CSDR  recognised  these  trends  and  mandated  the  European 
Securities  and  Markets  Authority  (ESMA),  in  close  cooperation  with  the  members  of  the 
European System  of Central  Banks (ESCB), to assess the appropriateness  of shortening  the 
settlement cycle in the EU and present a roadmap for how such a move could be carried out. 
ESMA published its report on 18 November 20248, recommending that the EU move to T+1 
no later than 11 October 2027.  

This  staff  working  document  considers  the  impacts  of  an  EU  move  to  a  shorter  settlement 
cycle. Shortening the settlement cycle in the EU would significantly change the way in which 
markets  function  today,  with  different  impacts  depending  on  the  type  of  stakeholder,  the 
category of transaction and the type of security. Quantifying some of the costs and benefits 
related to the shortening of the settlement cycle in the EU is challenging because of the lack 
of data, but the elements assessed by ESMA suggest that the benefits of a move in terms of 
risk  reduction,  margin  savings9  and  the  reduction  of  costs  incurred  by  inefficiencies 
stemming from the misalignment with other major jurisdictions globally, represent important 
benefits for the SIU. Moreover, investment in modernising,  harmonising and improving the 
efficiency and resilience of post-trade processes that would be prompted by a potential move 
to T+1 would facilitate achieving the objective of further promoting settlement efficiency in 
the  EU,  promoting  market  integration  and  ultimately  the  SIU,  and  avoiding  a  competitive 
disadvantage  for  EU  capital  markets,  which  could  see  traders  favour  other,  more  efficient 
markets.  Finally,  maintaining  the  current  settlement  cycle  in  the  EU  would  contribute  to 
further  fragmenting  the  SIU  as  different  EU  stakeholders  would  continue  to  implement 
divergent solutions to cope with shorter settlement in most of the world’s capital markets.  

Most of the identified costs associated with a move to T+1 would manifest in the short term, 
whereas  most  of  the  benefits  would  materialise  in  the  medium  to  long  term.  The  elements 
assessed by ESMA suggest that the impact of T+1 in terms of risk reduction, margin savings 
and the reduction of costs linked to the misalignment with other major jurisdictions globally, 
represent  important  benefits  for  the  competitiveness  of  EU  capital  markets  and  for  moving 

an extension of scope, but only at a later stage and after having conducted more analysis, to avoid delaying 
the move to T+1 (see Section 4, p.19 of this Staff Working Document).  

8   Report  ESMA  assessment  of  the  shortening  of  the  settlement  cycle  in  the  European  Union,  18  November 

2024, ESMA74-2119945925-1969. 

9      Margins savings is commonly used to refer to the savings in the provision of margin (collateral requirements 
to  cover  counterparty  risks)  that  market  participants  are  exposed  to.  See  Report  ESMA  assessment  of  the 
shortening of the settlement cycle in the European Union, 18 November 2024 ESMA74-2119945925-1969, 
page  11,  37,  38  and  Section  7.1.2  for  the  benefits  of  T+1  settlement  related  to  the  reduction  of  the  risk 
exposures subject to CCP guarantee and therefore of CCP margins. 

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towards  the  SIU  and  it  would  ultimately  improve  the  efficiency  of  EU  capital  markets  and 
hence maintain their competitiveness at global level10.  

Settling securities transactions on T+1 is already technically and legally possible in the EU. 
Hence  a  move  to  T+1  could  be  left  entirely  in  the  hands  of  the  EU  securities  industry  to 
coordinate and carry out. However, the higher level of complexity of EU financial markets - 
due to  the number of different  actors, systems  and currencies involved  -  compared to  other 
jurisdictions  that  already  moved  to  T+1  would  make  coordinating  the  process  extremely 
challenging for that industry without the legal certainty. Should an amendment be presented, 
the  faster  the  agreement,  the  more  time  there  would  be  for  all  EU  market  participants  to 
undertake  necessary  investments  and  prepare  for  the  move  to  T+1.  At  the  same  time,  to 
ensure the success of the project, it would be necessary to deepen the preparatory technical 
work needed to pave the way to a move to T+1.  

2. 

CONTEXT 

2.1.  What is the settlement cycle? 

Settlement is the completion of a securities transaction after it is concluded with the aim 
of discharging the obligations of the parties to that transaction through the transfer of 
cash or securities, or both11. The exchange of cash and securities is normally carried out in a 
securities settlement  system12 (SSS) operated by a CSD. In a CSD, the buyer’s  and seller’s 
leg of a transactions are matched, verified for the ability of the seller to deliver the securities 
and the ability of the buyer to pay, and after that the transactions are settled by discharging 
the respective obligations. If both the buyer and the seller of securities have accounts at the 
same intermediary (typically a bank or an investment firm), the transaction can also be settled 
by an internal transfer between those accounts. In such a case, the intermediary is acting as a 
settlement internaliser13, which executes transfer orders on behalf of clients or on its own 
account other than through an SSS.14  

The period of time between the trade date (the moment of a trade, denoted as ‘T’) and the 
settlement  date  (the  moment  the  buyer  receives  the  securities  and  the  seller  receives  the 
payment) is commonly referred to as the settlement cycle. In the EU, the settlement cycle 
for  most  of  the  transactions  in  transferrable  securities  executed  on  a  trading  venue  is 
regulated by the CSDR15, which requires settlement to take place no later than on the second 
business  day  after  the  date  of  the  trade,  also  known  as  T+2.  Because  of  their  specific 
complexity,  ,  primary  market  transactions16  were  not  subject  to  any  legal  requirement 
regarding the period of settlement in the EU.  

10   See Report ESMA assessment of the shortening of the settlement cycle in the European Union, 18 November 

2024, ESMA74-2119945925-1969, p.88. 

11   Article 2(7) of the CSDR. 
12   See Glossary. 
13   See Article 2(11) of the CSDR and Glossary.  
14   A  firm  internalises  settlement  if  it  receives  an  instruction  from  a  client  and  transfers  securities  from  one 

securities account to another in its books rather than forward it to another intermediary or a CSD.  

15   Regulation  (EU)  909/2014  of  the  European  Parliament  and  of  the  Council  of  23  July  2014  on  improving 
securities settlement in the European Union and on central securities depositories and amending Directives 
98/26/EC and 2014/65/EU and Regulation (EU) No 236/2012 OJ L 257, 28.8.2014, p. 1–72. 

16   The  primary  market  refers  commonly  to  transactions  pertaining  to  the  creation  of  a  security  (commonly 
called  issuance).  A  trade  in  primary  markets  corresponds  to  the  first  time  a  security  is  sold/bought.  The 
secondary market transactions correspond to the trade of securities among market participants that follows 
the primary market transaction. See Annex 1 (Glossary).  

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During the settlement cycle, two parallel workflows are operated: the instruction processing 
flow  and  the  assets-and-cash-provision  processing  flow.  The  instruction  processing  flow 
includes the successive instructions sent by market participants to the infrastructures for the 
execution of three steps: trading, clearing (when applicable) and settlement. As illustrated in 
Figure  1,  the  steps  between  a  trade  and  the  actual  settlement  of  that  trade  can  require  the 
involvement of more than eight stakeholders  to ensure that the instructions that contain the 
details  about  the  trade  flow  seamlessly  and  swiftly:  the  buyer,  the  seller,  their  respective 
brokers and the trading venue (trading layer), as well as the custodians, settlement agents and 
the CSD (settlement layer); where a central counterparty (CCP) is present in the market, the 
list of actors includes also the clearing members, who might or might not be the same as the 
brokers, and the CCP (clearing layer). 

Figure 1: Overview of the current securities transaction lifecycle 

Source: AFME 

The lifecycle of a transaction starts with the buyer (seller) who passes a buying (selling) order 
for  a  security  through  its  broker  (in  Figure  1,  trading  member)  to  a  trading  venue.  Once  a 
trade is captured17, the buyer (seller) is required to allocate the cash (securities) at stake, and 
confirm  in  writing  the  details  of  the  trade,  which  will  then  be  matched18.  Following  these 
steps,  the  instructions  can  be  matched  in  the  CSD  where  the  settlement  will  occur  and  the 
lifecycle of the transaction will end (see Figure 2). 

17   Trade  capture  is  the  process  of  recording  and  validating  trade  details  in  order  to  ensure  that  they  are 

accurately reflected in the market participants’ system.  

18   This step is called trade-level matching. 

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Figure 2: Pre-settlement processes19 

Process 

Allocation 

Confirmation 

Trade-level 
Matching 

[Clearing] 

Action 

Confirmation of 
the details of 
the executed 
transaction 

Investor 
identifies 
securities 
and cash to 
be used to 
settle a 
transaction 

Both parties 
to a 
transaction 
indicate their 
trade details, 
if they are 
similar, they 
are matched 

Actor 

Investment 
firms,  
Investors 

Timing 
of action 
Source: ESMA 

T0, until 
T+1 12pm 

Trading venues, 
Investment 
firms,  
Investors 
T0, possible 
until T+1 12pm 

Investment 
firms 

T0, T+1 

T0, T+1, T+2 

A CCP becomes 
buyer to all 
sellers and 
seller to all 
buyers and 
absorbs 
counterparty 
risk. Depends 
on type of 
financial 
instrument and 
trading venue.   
Clearing 
members 
CCPs 

CSD 
instruction/ 
matching 

Both legs of 
instructions to 
be entered in 
the settlement 
system to 
match if 
corresponding  

Securities 
position 
management/ 
inventory 
Parties ensure 
they have the 
securities 
necessary to 
settle the 
transaction, 
possibly 
involving 
securities 
financing 
transactions 

Cash position 
management 

Parties ensure 
they have the 
cash 
necessary to 
settle the 
transaction, 
possibly 
involving FX 
transactions 

CCP 
Investment 
firms,  
CSD 
T0 

Investment 
firms, Investors  

Investment 
firms, 
Investors  

T0, T+1 

T0, T+1, T+2 

Any  change  to  the  settlement  cycle  has  therefore  impacts  on  a  wide  range  of  market 
stakeholders  including  market  participants,  financial  market  infrastructures,  or  issuers  of 
securities.  With  a  settlement  cycle  set  to  T+1,  performing  the  necessary  steps  in  a  reduced 
amount  of  time  might  be  more  challenging  but  achievable20  if  harmonised  operational 
deadlines,  common  standards  for  the  format  of  the  data  that  flow  from  trade  execution  to 
settlement and more straight-through processing (STP) are put in place.21  

2.2. 

International developments 

2.2.1.  The Americas 

The  first  two  large  markets  that  shortened  their  settlement  cycle  to  T+1  were  China22  and 
India.23      However,  it  was  only  when  the  US  Securities  and  Exchange  Commission  (SEC) 

19   Each  column  of  the  table  in  Figure  2  includes  in  the  first  line  the  name  of  the  step  in  the  pre-settlement 
process, in the second line a short description of the step, in the third line the stakeholders carrying out such 
step,  in  the  last  line  the  moment  when  the  step  is  carried  out.  For  instance,  clearing  consists  in  the 
interposition  of  a  CCP  between  buyers  and  sellers,  is  carried  out  by  CCPs  and  clearing  members  and 
happens between T0 and T+2.  

20   See Report ESMA assessment of the shortening of the settlement cycle in the European Union, 18 November 

2024, ESMA74-2119945925-1969 p. 7.  

21   See Report ESMA assessment of the shortening of the settlement cycle in the European Union, 18 November 

2024, ESMA74-2119945925-1969. 

22   In  mainland  China,  several  settlement  periods  coexist  following  the  segmentation  of  the  Chinese  equity 
market and the status of the counterparties to bond trade. For so-called A shares, mainland China currently 

5 

 
 
 
 
 
 
signalled its intention to shorten the settlement cycle in the US to T+1 in 2021, following the 
turbulence  in  the  domestic  capital  markets  caused  by  the  “Gamestop  incident”24,  that  the 
topic  gained  greater  prominence.  During  that  incident,  risks  related  to  settlement25 
substantially increased due to the high volatility of the US securities’ prices (notably for the 
share  of  a  US  company  called  Gamestop).  Since  one  way  to  contribute  to  mitigating  those 
risks  is  to  reduce  the  settlement  period,  the  US  moved  operationally  to  a  shorter  standard 
settlement cycle26 on 28 May 2024 (see below for more details). Mexico27 and Canada28, due 
to  close  links  and  exposure  to  the  US  capital  market,  moved  the  day  before.  In  addition, 
Argentina29  (stocks  and  bonds),  Jamaica30  and  Peru  (dual-listed  securities)  decided  to  align 
with the North American move as well31.  
The  SEC  rules32  shortening  the  standard  settlement  cycle  for  the  majority  of  broker-dealer 
transactions from T+2 to T+1 in the US were adopted on 5 May 2023 with a compliance date 
on 28 May 2024. Given the strong political will and overall support from the US industry, the 
SEC did not carry out  a thorough cost-benefit analysis before adopting  the rules shortening 
the settlement cycle.  
In terms of their material scope, the SEC rules exclude certain securities based swaps33 and 
transactions  in  government  securities34,  municipal  securities,  commercial  paper,  banker’s 
acceptances  or  commercial  bills35  (these  transactions  were  also  not  in  the  scope  of  the  US 

settles securities on trade date (T0) and cash on the following business day (T+1). B shares equity markets 
follow  a  longer  settlement  cycle  where  trades  must  settle  within  3  days  after  trade  date  (T+3).  See 
https://english.sse.com.cn/access/stockconnect/settlement/ for more details. China moved to T+1 end-2022.  
23   In India, the transition from T+2 to T+1 was staggered. It started in the beginning of 2022 and was finally 

completed in January 2023. See ESMA report p.81. 

24  See  report  by 

the  SEC  on  Equity  and  Options  Market  Structure  Conditions 

in  Early  2021. 

https://www.sec.gov/files/staff-report-equity-options-market-struction-conditions-early-2021.pdf 

25   See footnote 5. 
26   The US Securities Exchange Commission adopted a rule to shorten the standard settlement cycle for most of 
the broker-dealer transactions from T+2 to T+1 with a compliance date on 28 May 2024. See more details in 
The US move to T+1. https://www.sec.gov/files/rules/final/2023/34-96930.pdf 

27   The  National  Banking  and  Securities  Commission  and  Banxico  (Central  Bank  of  Mexico)  approved  the 
change  of  the  settlement  cycle  for  equity  securities  from  two  business  days  to  one  business  day,  effective 
from 
2024. 
https://www.clearstream.com/resource/blob/3924654/8cb30d80849c599f29165a3bf43441d8/a24028-
approval-data.pdf 

May 

27 

28   The Canadian Securities Administrator adopted rule amendments supporting the move to a shorter settlement 
cycle  for  equity  and  long-term  debt  market  trades  which  came  into  force  on  27  May  2024. 
https://www.securities-administrators.ca/news/canadian-securities-regulators-announce-move-to-t1-
settlement-cycle/ 

29   Bolsas y Mercados Argentinos announced on 13 May 2024 the shortening of its standard settlement cycle 

effective as of 27 May 2024.  

30   The  Jamaica  Stock  Exchange  announced  changes  to  settlement  cycle  and  trading  hours  on  20  May  2024, 
effective from 27 May 2024. https://www.jamstockex.com/the-jamaica-stock-exchange-announces-changes-
to-settlement-cycle-and-trading-hours/  

31   The settlement period for securities listed both in Peru and in North America moved to T+1on 28 May 2024. 

Peru is expected to shift its settlement cycle for all equities in Q2 2025. 

32   See  17  CFR  Parts  232,  240,  and  275  SEC  Final  rule  on  Shortening  the  securities  transaction  settlement 

cycle. 

33   Idem, p. 181. 
34  Nb. transactions in government securities were already being settled on T+1 before the May 2024 move. 
35   Idem, p. 10. 

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T+2 rule), as well as certain transactions in which both counterparties expressly agreed36 to 
settle  later  than  on  T+1,  from  the  T+1  requirement.  Conversely,  securities  financing 
transactions (SFTs) are not excluded from the scope of the US move. In addition to the rule 
on the standard settlement cycle in secondary markets, the SEC also shortened the cycle for 
firm  commitment  offering  priced  from  T+4  to  T+237.  This  settlement  cycle  relates  to  the 
settlement  of  securities  sold  by  an  issuer  to  an  initial  purchaser.  Such  transactions  are 
identified  as  primary  market  transactions.  The  move  was  accompanied  with  measures38  to 
facilitate the timely settlement of those transactions. 

The analysis of the US move to T+1 shows that one of the clear benefits of T+1 settlement is 
a  reduction  in  the  time  during  which  positions  securities  transactions  cleared  by  a  CCP 
remain open and a consequent reduction in the  margins provided to the CCP39 to cover the 
risk related to those open transactions.  

2.2.2.  Europe (excluding EU) 

Following the US announcement, the UK established an Accelerated Settlement Taskforce to 
prepare  a  migration  to  T+1  settlement  for  the  UK  capital  market40  (see  below  for  more 
details). This Taskforce published a report with its initial findings41 at the end of March 2024. 
Notably,  the  document  does  not  provide  any  cost-benefit  assessment  of  a  move,  but  rather 
states that the question to be answered is how the UK should move to T+1 and not whether it 
should  do  so42.  The  report  proposed  a  two-stage  approach:  (1)  introduction  of  operational 
changes to the settlement processes by end 2025; and (2) implementation and testing of the 
changes to settlement rules by end 2027. According to the report, the timing for the second 
stage is subject to the possible cooperation with the EU and Switzerland, although alignment 
with the EU is not considered as a prerequisite for the UK transition to T+143.  

The rules pertaining to the settlement cycle in the UK are currently the same as in the EU and 
set out in the UK CSDR44 Article 5(2).  In view of a move to T+1 in the UK by the end of 
2027, the Accelerated Settlement Taskforce drafted a list of recommendations45 for a smooth 
transition.  These  recommendations  include:  maintaining  the  scope  of  Article  5(2)  while 
moving to T+1, a safe-harbour mechanism for Eurobonds and for exchange-traded products 
with an underlying securities mainly traded in the EU, and a set of market practices for post-

36  Ibid. The “override provision” allowing an extension of the settlement period can only be used in “unusual” 
or “limited” circumstances. See also SEC FAQ regarding the transition to a T+1 Standard Settlement Cycle. 
SEC.gov | Shortening the Securities Transaction Settlement Cycle. 

37   Idem, p. 50.  The misalignment of primary settlement cycles in interconnected markets does not have any 
significant consequences reported by market participants to this date. In this respect,  the shortening of the 
settlement  of  primary  market  operations  in  the  US  does  not  entail  misalignment  issues  that  EU  market 
participants would need to address. 

38  Idem, p. 60.  Counterparties of a trade are required to submit allocation, confirmation and affirmation of the 
details of the trade that should be settled in T+1 by 21.00 at the latest on the date of the trade; and providers 
of central matching services (dealing with pre-settlement processes described in Section 2.1) are required to 
establish, implement, maintain and enforce policies and procedures that facilitate STP.  

39   See Section 3.3, for more details.  
40   See announcement by the UK Treasury and more details in the UK move to T+1.  
41   The Accelerated Settlement Taskforce Report was published in March 2024.  
42   See Letter to Chancellor of the Exchequer from Charlie Geffen, Head of the UK Accelerated Settlement 

Taskforce, in ”Accelerated Settlement Taskforce Report”, March 2024. 

43   See Accelerated Settlement Taskforce, Technical Group draft recommendations report & consultation 
44  See Regulations originating from the EU, Regulation (EU) No 909/2014 of the European Parliament and of 

the Council. https://www.legislation.gov.uk/eur/2014/909/contents 

45   See Accelerated Settlement Taskforce, Technical Group draft recommendations report & consultation. 

7 

 
 
 
trade,  such  as  exempting  SFTs  from  the  voluntarily  move  to  T+1  for  OTC  transactions  or 
harmonising the debt instruments issuance processes. 

In  Switzerland,  the  Swiss  financial  industry  has  underlined  a  need  to  move  to  shorter 
settlement  “for  competitiveness  reasons”  as  well  as  to  coordinate  a  move  with  the  EU  and 
UK46.  

2.2.3.  Asia-Pacific 

In  Australia,  a  T+1  Working  Group  was  established  by  the  Australian  Securities  Exchange 
Business Committee47 at the end of 2023 to assess a potential transition. According to some 
reports, the Monetary Authority of Singapore and the New Zealand Stock Exchange are also 
exploring  avenues48  for  possible  transition  to  T+1.  The  Japan  Financial  Services  Agency 
(JFSA)  included  in  their  strategic  priorities49  a  monitoring  of  the  evolution  of  settlement 
cycles  in  global  capital  markets  and  coordination  with  market  participants  regarding  a 
potential shortening of the settlement cycle in Japanese capital markets.  

Some  jurisdictions  are  not  stopping  at  T+1;  in  India,  although  the  move  to  T+1  was 
completed  in  January  2023,  the  Securities  Exchange  Board  of  India  (SEBI)  has  already 
initiated an optional transition50 to T+0 in March 2024 for a limited number of equities and 
brokers. 

2.2.4.  Conclusion 

To  summarise,  there  is  a  clear  momentum  towards  a  T+1  settlement  cycle  and  therefore  a 
rising  pressure  to  avoid  misalignments.  As  of  October  2024,  capital  markets  that  represent 
60% of the global market capitalisation are currently settled in T+151. Once the UK and the 
Asian  Pacific  jurisdictions  that  have  announced  their  future  transition  will  have  officially 
shifted, this proportion will increase to 75%52 (see Annex 2). If it were to remain on T+2, the 
EU  would  therefore  be  misaligned  with  its  largest  counterparties  in  the  US,  Europe  and 
Asia53. Such a misalignment will imply additional costs for EU market participants due to the 
operational inefficiencies from handling different settlement cycles. As such, this could have 
a negative impact on the competitiveness of the SIU.  

2.3.  Economic context  

2.3.1.  The EU market for settlement is fragmented 

Historically,  CSDs  were  established  along  national  lines.  Today,  this  fragmentation 
remains with 26 CSDs, of which 2 are international CSDs (ICSDs), currently authorised 
in the EU under Article 16 of the CSDR. Nevertheless, the EU market structure is slowly 

46   See  UBS representative Elisa Menardo speech at the  conference  Accelerated settlement across Europe,  an 

EU UK and Swiss perspective on 10 June 2024. 

47   See  ASX  announcement,  https://www.asx.com.au/markets/clearing-and-settlement-services/t1-settlement-

cycle  

48   See BNP Paribas Securities, Global T+1 outlook 23 September 2024  
49   See  JFSA  2024  Financial  public  policy  report,  title  translated,  document  only  available  in  Japanese. 

https://fsa.go.jp/news/r6/20240830/20240830_main.pdf 

50   See  Securities  and  Exchange  Board  of  India  announcement  to  introduce  T+0  optional  settlement. 
https://www.sebi.gov.in/legal/circulars/mar-2024/introduction-of-beta-version-of-t-0-rolling-settlement-
cycle-on-optional-basis-in-addition-to-the-existing-t-1-settlement-cycle-in-equity-cash-markets_82455.html 
51   Statistics obtained by combining data from ECMI 2023 Statistical Package, EFAMA fact book 2024 and the 

list of jurisdictions that have officially announced moving to T+1 settlement.   

52   Ibid. 
53   Ibid. 

8 

 
 
 
evolving;  at  the  end  of  2010  there  were  over  30  CSDs  in  the  EU.54  In  contrast,  other 
international markets have usually one, or at most two, CSDs; for example, the US has two 
CSDs55. 

In 2014, when the CSDR was adopted, for EUR 43.5 trillion worth of securities held on their 
accounts, EU CSDs handled over 330 million delivery instructions for a total value of over 
EUR 850 trillion.  In 2023, EU CSDs,  including  those owned by central  banks, handled, for 
securities  worth  EUR 65.5 trillion  held  on  their  accounts,  more  than  526  million  delivery 
instructions  with  a  total value  of  over  EUR 1552 trillion.56 This  means  a  growth  of  50%  in 
value  of  securities  held,  59%  in  number  of  delivery  instructions  and  83%  in  total  value  of 
instructions settled in the period between 2014 and 2023.  

Despite the large number of CSDs operating in the EU, in 2023, the majority of delivery 
instructions  (by  value)  were  settled  in  the  two  ICSDs,  namely  Euroclear  Bank  (BE)  (48%) 
and Clearstream Banking SA (LU) (19%), while the three largest domestic CSDs in terms of 
delivery  instructions  settled  (by  value)  were  Euroclear  France  (10%),  Clearstream  Banking 
AG (DE) (8%) and Monte Titoli (IT) (6%) (see Table 1 below for a breakdown by Member 
State). 

Table 1: Value of delivery instructions (EUR, billion) 

Belgium 
Luxembourg 
France 
Germany 
Italy 
Spain 
Denmark 
Poland 
Sweden 
Czechia 
Netherlands 
Greece 
Finland 
Hungary 
Austria 
Portugal 
Romania 
Slovakia 
Bulgaria 
Slovenia 
Lithuania 

765 572 
292 324 
158 204 
127 764 
88 630 
37 517 
20 847 
20 322 
12 459 
8 970 
7 561 
7 467 
1 358 
1 335 
1 159 
528 
189 
53.6 
41.7 
25.6 
11.3 

54   Commission Staff Working Document, “Impact Assessment accompanying the proposal for a regulation on 
improving securities settlement in the European Union and on Central Securities Depositories (CSDs)”, 
SWD (2012) 22 final. 

55   In the US corporate bonds and equities are cleared through the Depository Trust and Clearing Corporation 

(DTCC) while government securities and related entities are processed through the Federal Reserve System. 

56   Data generated through the Securities Trading, Clearing and Settlement Statistics Database, European 

Central Bank, https://sdw.ecb.europa.eu/browse.do?node=9691131.  

9 

 
 
 
Estonia 
Latvia 
Malta 
Cyprus 
Ireland* 
Croatia 
Total 
Source: ECB Statistics Database 
Notes: *Irish securities are settled in Euroclear Bank in Belgium. Separate numbers for the value of deliveries 
for Irish-related securities settled within Euroclear Bank are not available. 

6.4 
5.9 
1.6 
0.6 
N/A 
N/A 
1 552 352 

2.3.2.  Settlement cycle in the EU 

CSDR requires that transactions in transferable securities that are executed on a trading venue 
should settle no later than the second business day following the execution of the transaction 
(T+2).  

However,  CSDs  are  already  capable  of  settling  transactions  in  T+1  or  even  T+0  and  many 
transactions already do settle on a shorter settlement  cycle than T+2. Based on information 
collected by ESMA57  from  both  TARGET2-Securities (T2S)  and CSDs not  participating  in 
T2S,58 the settlement  of transactions on T+1 and  even on T+0 is  a predominant practice in 
some asset classes such as sovereign debt, in terms of both number and value of transactions. 
For shares and exchange-traded funds (ETFs), transactions on T2S settle mostly on T+2, both 
in  terms  of volumes and values (see Annex 5, Table 1), while in  CSDs not  participating  in 
T2S, the majority of the volume of transactions settle on T+2 (or beyond), while in terms of 
value, the majority of the transactions on shares settle on T+1 or less and the majority of ETF 
transactions  settles on T+2 or beyond  (See Annex 5, Table  3).  For  UCITS, information  for 
both T2S and non-T2S CSDs shows that most of the volume of transactions settle on T+2 or 
beyond, while the majority of the value settles on T+1 or less. Finally, as regards  SFTs, for 
those  settled  on  T2S,  while  in  terms  of  volume  the  majority  of  matched  settlement 
instructions settle on T+1 or less, in terms of values the picture is more diverse, with more 
than  75%  of  repo  transactions  settling  in  T+1  or  less,  a  bit  more  than  60%  of  securities 
lending  transactions  settling  in  T+1  or  less,  and  around  35%  of  securities  borrowing 
transactions  settling  in  T+1  or  less  (See  Annex  5,  Table  2).  For  those  settled  in  non-T2S 
CSDs,  repo  transactions  settle  mostly  on  T+0,  while  securities  borrowing  and  securities 
lending transactions settle mostly in T+1 (See Annex 5, Table 4). 

2.3.3.  EU capital markets are part of the global financial system 

EU capital markets are large and growing. However, they are still relatively under-developed 
when  compared  with  the  US.  At  the  end  of  2022,  the  total  market  capitalisation  of  EU 
domiciled  issuers  amounted  to  approximately  EUR  17  trillion,  which  only  accounts  for 

57   For a more detailed breakdown please see Annex III of Report on ESMA assessment of the shortening of the 

settlement cycle in the European Union, p.98-102. 

58   T2S  is  a  pan-European  settlement  platform  operated  by  the  Eurosystem  and  coordinated  by  the  European 
Central  Bank  (ECB)  where  the  exchange  of  a  security  and  cash  can  happen  simultaneously,  i.e.  where 
delivery  versus  payment  is  possible.  The  vast  majority  of  European  CSDs  are  connected  to  T2S.  See 
Glossary. 

10 

 
 
 
11.4%  of  the  global  market  capitalisation59  while  the  EU  gross  domestic  product  (GDP) 
represents  17.5%  of  the  world  GDP  at  constant  prices).  In  comparison,  US  capital  markets 
amounted to 45% of global market capitalisation, while the US GDP represents 15.5% of the 
world GDP at constant prices. Measured at constant prices, the market-capitalisation-to-GDP 
ratio of the US (2.90) is more than 4 times higher than that of the EU (0.65). Moreover, the 
market for issuance of equity in the EU is three times smaller60 than in the US. Finally, the 
size of the  EU market  for  Undertaking  for Collective  Investment  in  Transferable Securities 
(UCITS) that are ETFs, which amounts to EUR 1.8 trillion, is also approximately five times 
smaller than the US one (EUR 9 trillion)61.  

There  is  a  relatively  high  degree  of  interconnectedness  between  the  EU  and  the  global 
financial system. More than 50% of European UCITS portfolios in equity are invested in the 
US,  in  the  UK  or  in  Switzerland.  62  In  the  case  of  UCITS  investing  only  in  bonds,  the 
situation is  similar, with  the US  accounting for  28% of the  asset allocation and  the UK for 
10%.63  The  level  of  interconnectedness  of  EU  capital  markets  with  the  UK  can  also  be 
illustrated  by  the  share  of  repurchase  agreements  (‘repos’)  and  of  securities  lending  and 
borrowing  transactions  operated  between  both  jurisdictions:  12%  of  repo-based  borrowing 
comes from the UK and 9% of EU repo-based lending is to the UK64.   

Given the role of the EU financial system in the global context, as well as the relatively high 
degree  of  interconnectedness  between  the  EU  financial  system  with  jurisdictions  that  have 
moved to T+1 or are planning to move to T+1, the misalignments between the EU and those 
jurisdictions are only going to increase in the absence of EU action. 

2.4.  Legal and policy developments 

The regulation of the settlement cycle has long been a subject for debate in the EU. The 2001 
Giovannini  Report  identified  the  misalignment  of  settlement  cycles  as  a  key  barrier  to  the 
functioning  of  the  settlement  of  capital  markets,  increasing  the  costs  of  cross-border 
activity.65 The 2003 Giovannini Report subsequently underlined that a harmonised settlement 
cycle was needed in the EU, noting that divergences existed even within the EU. That report 
also  emphasised  the  importance  of  global  alignment  of  settlement  cycles,  “the  global 
environment should also be taken into account and, in particular, the decision in the US not 
to pursue T+1 settlement and to remain at T+3”.66 

The topic of settlement cycles was first addressed at EU level in a legislative proposal aimed 
at  regulating  the  activities  of  CSDs;  the  proposal  was  published  on  7  March  2012.67  The 
resulting  CSDR,  which  entered  into  force  on  23  July  2014,  introduced  a  harmonised 

59   See SIFMA Research quarterly 2023: Equity and Related, 

https://www.sifma.org/resources/research/research-quarterly-equity-and-related/. 

60   See ECMI 2023 Statistical Package. 
61   See ETFGI report  on UCITS ETF. 
62   See EFAMA fact book 2024.  
63   Ibid. 
64   See ESMA first overview of EU securities financing transactions markets 
65   Giovannini Report, 2001. The Giovannini Group. Cross-border clearing and settlement arrangements in the 

European Union. (europa.eu).  

66   Giovannini Group. Second report on EU clearing and settlement arrangements (europa.eu) 
67   Proposal for a Regulation of The European Parliament and of the Council on improving securities settlement 
in  the  European  Union  and  on  central  securities  depositories  (CSDs)  and  amending  Directive  98/26/EC/* 
COM/2012/073 final - 2012/0029 (COD) */ 

11 

 
 
 
settlement  cycle  for  transactions  in  transferable  securities  which  are  executed  on  trading 
venues.  According  to  the  impact  assessment  accompanying  the  proposal68,  differences  in 
settlement  cycles  create  problems,  in  particular  in  terms  of  safety  and  efficiency,  notably 
higher operational risks for market participants, increased back-office costs, higher settlement 
fails rate, increased funding costs, more complex processing of corporate actions, and higher 
market  and  counterparty  risks.  Moreover,  the  more  connected  the  markets,  the  greater  the 
consequences of these differences. 

During  the  negotiations  on  a  2022  proposal  amending  the  CSDR  (CSDR  Refit)69,  these 
questions resurfaced due to various jurisdictions globally that moved, were in the process of 
moving,  or  were  considering  to  move,  to  settlement  in  T+1.  As  a  result,  EU  co-legislators 
mandated  ESMA,  in  close  cooperation  with  the  members  of  the  ESCB,  to  submit  a  report 
assessing  the  appropriateness  of  shortening  the  settlement  cycle  in  the  EU  and  the  related 
costs and benefits and providing a detailed roadmap on how to move to a shorter settlement 
cycle  in  the  EU.  In  this  report70,  ESMA  recommends  the  EU  to  move  to  a  T+1  settlement 
cycle by 11 October 2027. The report also recommends that the move to T+1 be implemented 
through an amendment to the CSDR that would shorten the settlement cycle as currently set 
out in Article 5(2) of that Regulation to no later than one business day after the trade takes 
place. 

3. 

PROBLEMS CAUSED BY THE MISALIGNMENT OF SETTLEMENT CYCLES  

3.1. 

Increasing misalignment of the EU settlement cycle with global capital markets 

In addition to the existing time-zone difference, the transition to T+1 in North American and 
in  some Asian capital  markets  has introduced further misalignment in  the settlement  cycles 
between the EU and those capital markets. As described below, this misalignment increases 
the complexity of transactions with those markets and hence creates additional costs for EU 
stakeholders, in particular for issuers, investors, trading venues and CSDs.  

Regarding investors, in particular funds, as explained in the feedback statement to ESMA’s 
call for evidence71, the main cost arising from the misalignment of settlement cycles lies in 
the need to cover the liquidity mismatch between the day of the purchase/sale of securities in 
jurisdictions that settle on T+1 and the settlement of the investment funds’ shares in the EU, 
which  still  settle  in  a  T+2  environment.  Figure  3  below  illustrates  the  issue,  showing  that 
subscription payments to the fund from investors will be received by the fund at least one day 
after the fund has purchased the securities on US markets (i.e. in T+3). There will therefore 
be a period of at least one day where the fund will have provided the required cash for the 
purchase  of  the  US  securities  without  having  received  the  payments  for  subscription.  This 
gap of one day creates a liquidity mismatch. Funds need to secure cash to cover this gap.   

68   Impact Assessment accompanying the document Proposal for a Regulation of the European Parliament and 
of  the    Council  on  improving  securities  settlement  in  the  European  Union  and  on  Central  Securities 
Depositories (CSDs) and amending Directive 98/26/EC 

69   Proposal  for  a  Regulation  of  the  European  Parliament  and  of  the  Council  amending  Regulation  (EU)  No 
909/2014  as  regards  settlement  discipline,  cross-border  provision  of  services,  supervisory  cooperation, 
provision  of  banking  type  ancillary  services  and  requirements  for  third-country  central  securities 
depositories, COM(2022) 120 final, 16 March 2022. 

70    See Report on ESMA assessment of the shortening of the settlement cycle in the European Union p. 6-7 
71   See  ESMA74-2119945925-1959 Feedback statement of the Call for evidence on shortening  the settlement 
cycle (europa.eu) Several respondents indicate that the misalignment will increase the risk of settlement fails 
and of costs, p.31 

12 

 
 
 
Figure  3:  Traditional  investment  fund:  Liquidity  Mismatch  due  to  the  misalignment  in 
settlement cycles 

Source: Association of the Luxembourg Fund Industry 

In  addition,  specifically  in  the  case  of  managers  of  exchange  traded  funds  (ETFs),  there  is 
some preliminary evidence in ESMA’s report that, because of the abovementioned liquidity 
mismatch,  investing  in  US  securities  has  become  more  expensive  on  Thursdays.  Indeed, 
lower ETFs’ trading volumes on Thursdays have been observed by market participants, with 
a reduction in  primary  market  trading  on those  days. The  “Thursday  effect” shows that  the 
costs of covering the funding gap on Thursdays has become so prohibitive72 for some ETFs 
manufacturers  that  there  have  been  significant  changes  in  trading  patterns.  If  this 
phenomenon were to be confirmed over a longer period, this sort of impact on ETF trading 
could only be to the detriment of the EU asset management industry and its competitiveness, 
as well as ultimately to the detriment of end-investors, since the competition from T+1 capital 
markets would not be affected by the cash management mismatch.   

A  monitoring  by  ESMA  of  the  developments  in  EU  ETFs’  markets  during  and  after  the 
transition to T+1 in the US shows that the liquidity73 of EU ETFs invested in US equities has 
declined  following  the  T+1  move.  Moreover,  funds  investing  in  US  securities  showed  on 
average a higher premium in June 2024 and in Q3 2024 while premiums of ETFs investing in 
EU  securities  also  increased  but  in  a  smaller  proportion.  This  illustrates  a  decreased 
performance74 of EU ETFs compared to US equivalents (See Annex 3).   

Regarding  issuers,  trading  venues,  and  CSDs,  the  shift  to  T+1  in  the  US  and  subsequent 
misalignment in settlement cycles has also resulted in the application of different key dates 
for corporate events  of securities listed and traded simultaneously in  the US  and in  the EU 
(so-called  dual-listed  securities).  See  Section  3.2  below  for  more  information  on  this 
misalignment.  This  misalignment  has  created  additional  costs  for  EU  stakeholders  in  the 
chain  of  trade,  including  for  issuers  of  those  dual-listed  shares,  trading  venues  where  those 
shares can be traded and for CSDs regarding the settlement of such securities. 

72   The funding gap is specifically bigger on Thursdays as it would not be recovered from before Monday when 

the subscription or redemption proceeds would settle.  

73   ESMA’s  analysis  is  focused  on  premium  to  Net  Asset  Value  to  monitor  whether  the  move  to  T+1  had 

negative impacts on the arbitrage activity for ETFs and their liquidity.  

74   See Report ESMA assessment of the shortening of the settlement cycle in the European Union, 18 November 

2024, p.42 

13 

 
 
 
 
These negative impacts from the US move are likely to become even more acute if the UK 
and Switzerland were to move to T+1 before the EU as the higher the integration and volume 
of business between other jurisdictions, the greater the potential impacts on the EU. Should 
the UK and Switzerland follow the US, as is planned, this would mean that fund managers 
would  have  to  manage  different  settlement  cycles  between  the  ETF  units/shares  and  the 
ETFs’ underlying securities as well as the funding gap that results from the misalignment for 
more  than  a  half  of  their  investments  in  equities75.  Similarly,  the  challenges  faced  by  the 
issuers of multi-listed shares would increase given the fact that the problems (see Section 3.2) 
currently faced for securities listed both in the US and in the EU would also materialise for 
securities listed in the UK or in Switzerland and in the EU.   

The  impacts  described  above  which  are  stemming  from  the  further  misalignment  between 
settlement cycles in the US, in Canada, and with the UK should the EU maintain its current 
settlement  cycle  has  two  main  consequences:  (i)  it  would  contribute  to  a  further 
fragmentation  of  EU  capital  markets  and  (ii)  pose  risks  to  the  attractiveness  and 
competitiveness of those markets.   

3.2.  Further fragmentation of EU capital markets 

Regarding  CSDs  and  issuers,  the  shift  to  T+1  in  the  US  has  resulted  in  the  application  of 
different key dates for corporate events of securities listed or traded simultaneously in the US 
and in the EU. In this respect, the North American move to T+1 has created a misalignment 
of the ex-dates76 and record dates77 of corporate events of securities listed or traded in both 
jurisdictions.  This  misalignment  currently  creates  additional  operational  costs  for  EU 
stakeholders in the chain of trade and settlement of those dual-listed securities, including the 
exercise  of  shareholders’  rights.  The  misalignment  is  thus  problematic  for  retail  investors, 
including the lack of clarity regarding the payment of dividends.  

According  to  the  European  Central  Securities  Depositories Association  (ECSDA),  different 
scenarios78 could be envisaged to manage the situation:  

a)  the  timeline  for  the  corporate  events  follows  the  announcement  by  the  issuer  in  North 

American markets (i.e. ex-date and record date are the same),  

b)  the timeline for the corporate events follows those of European market standards (i.e. ex-

date occurs one day before the record date), or  

c)  the settlement of multi-listed securities with the main place of trading in North American 
markets  is  operated in T+1 even if those securities are traded on a European venue and 
settled in an EU CSD.  

Each  solution  presents  different  benefits  and  shortcomings.  Option  a)  would  minimise  the 
period of time  where there is  a difference in  the share price in  the Stock Exchange listings 
across the Atlantic Ocean and avoid an adjustment of the European listing one day prior to 
the  share  price  adjustment  in  the  North  American  markets  because  of  the  corporate  event 
announcement.  This  would  mean  that  EU  CSDs  would  need  to  raise  a  certain  number  of 

75   More than 50% of European UCITS portfolios in equity are invested in the US, in the UK or in Switzerland, 

see EFAMA Fact Book 2024.  

76   Ex-date or ex-dividend date is the date after which a market participant that buys a share will not receive the 
payment of the next dividend. In a T+2 environment, the ex-dividend date is one day before the record date. 
77   The record date is the date when the company that issued a share establishes the list of its shareholders that 

will receive the payment of the next dividend. 

78   See 

ECSDA-AFME-FESE 

(https://ecsda.eu/wp-
content/uploads/2024/09/2024_09_03_Associations_note_T1-European_Impact_on_Corporate-Actions.pdf). 

Corporate 

Actions 

paper 

joint 

on 

14 

 
 
 
market claims. For EU issuers, the number of true ‘shareholders’ holding the security at the 
time  of  the  record  date  would  decrease,  which  reduces  transparency.  Option  b)  would 
introduce a difference in the share price following the stock exchange listing but would avoid 
market claims79. This is also preferrable for issuers who will have a more accurate overview 
of  the  shareholders  at  the  time  of  the  record  date.  This  solution  is  also  consistent  with  the 
current European Standards for processing Corporate Actions80. The last option, settling those 
dual-listed securities in T+1 was discarded by market participants because it was not deemed 
sustainable  to  maintain  different  settlement  cycles  for  securities  depending  on  whether  the 
securities were multi-listed or not.  

To  this  date,  no  common  approach  has  been  agreed  by  EU  stakeholders.  According  to 
anecdotal  evidence  provided  to  Commission  services,  different  trading  venues  and  CSDs 
have taken different approaches ranging from stopping trading in dual-listed securities on an 
EU  trading  venue  to  enabling  T+1  settlement  for  those  securities  impacted.  Given  the  fact 
that there are 26 CSDs authorised in the EU81, more than 300 trading venues82 and about 200 
dual-listed securities (EU-US)83, the lack of harmonisation  in  the way to  proceed regarding 
corporate  events  for  those  securities  contributes  to  a  multitude  of  frictional  situations,  a 
decreased transparency for relevant EU issuers and end-investors, and a further fragmentation 
of the EU trade and post-trade landscapes. This increase in fragmentation is contrary to the 
objectives of the SIU of building deep and attractive capital markets.  

3.3.  Risks to the attractiveness and competitiveness of EU capital markets 

As mentioned in Section 3.1, there is preliminary evidence that the misalignment between the 
EU  and  US  settlement  cycles  has  increased  the  cost  for  EU  fund  managers,  in  particular 
ETFs, investing in US securities. If this impact is confirmed over a longer period of time, EU 
fund  managers  would  see  their  competitiveness  against  US  fund  managers  put  in  jeopardy. 
The problem would be exacerbated further if a similar misalignment would arise with the UK 
and Switzerland84.  

At  the  end  of  2014,  the  move  from  T+3  to  T+2  in  the  EU  was  undertaken  alongside  the 
establishment of TARGET2-Securities, which operates under a T+2 settlement cycle. At that 
time, the EU led the way in accelerating settlement. The US followed adopting T+2 two years 
later. The T+2 cycle became the standard for the major capital markets. The situation today is 
different; as described above there is a clear momentum globally towards a shorter settlement 
cycle, with the EU currently still on T+2. 

The  move  to  T+1  has  delivered  more  efficiency,  more  robustness  and  substantial  margin 
savings to the US capital market. The move did not result in reduced settlement efficiency in 
spite of the shorter timelines involved to complete the various post-trade processes: fail rates 
following the migration  decreased by 11 basis points compared to  the same period  average 
during the previous year85. As the period of time during which counterparty and market risks 

79   Market claim is the process of reallocating the proceeds of a distribution to the contractually entitled party.  
80   See Market Standards for Corporate Actions processing. 
81   See ESMA CSD register. 
82   See ESMA Market report on EU securities Market 2023. 
83   Ibid. 
84   If a T+2 cycle is maintained in the EU while the UK moves to T+1 settlement. 
85   See  DTCC 
reporting  metrics 

https://www.dtcc.com/-
/media/Files/PDFs/T2/SIFMA-UST1-Daily-Reporting-Metrics-Template-GC.pdf.  Please  note  that  fail  rates 
in the US are measured differently compared to the EU. 

efficiency. 

settlement 

daily 

on 

15 

 
 
 
borne by the clearing members is reduced by half, the clearing fund86 of the US CCP clearing 
equity  transactions  (the  National  Securities  Clearing  Corporation  or  NSCC)  decreased  by 
US$ 3 7000 million (29%) compared to the average value of the previous quarter, i.e. from 
US$ 12 800 million to US$  9 100 million.  87 This margin reduction is the most illustrative 
example  of  the  risk  reduction  borne  by  the  counterparts  of  a  trade  in  securities  when  the 
settlement cycle is reduced.  

The performance of equity indices in the US has been higher than their equivalent in the EU 
over recent years, the number of companies in the EU that require an additional listing in the 
US  is  constantly  growing,  and  the  EU  share  of  Global  fixed  income  market  is  also 
decreasing. These different indicators show that EU capital markets face challenges to catch-
up  with  other  capital  markets  internationally.  Remaining  on  T+2,  when  75%  of  the  world 
capitalisation  will  be  settled  in  T+1  will  only  contribute  to  a  further  decline  of  EU  capital 
markets attractiveness and competitiveness.  

A  shift  to  T+1  is  only  possible  with  an  improvement  in  post-trade  processes,  including  a 
substantial  increase  in  the  use  of  STP  and  of  automation  in  general.  The  longer  the  EU 
maintains a T+2 settlement  cycle while global capital  markets  move to T+1, the higher the 
likelihood  that  once  the  EU  also  moves  to  T+1,  the  EU  market  participants  would  then  be 
forced  to  use  solutions  and  services  offered  by  existing  third-country  providers  instead  of 
solutions tailored to the EU market structure.  

Lastly, not moving to T+1 would raise legitimate concerns about the overall attractiveness of 
the EU trading environment, compared to the level of service offered by other jurisdictions. 
The  efficiency  of  settlement–  especially  if  it  includes  new  costs  to  bridge  settlement  cycle 
gaps between the EU and other jurisdictions – is a key feature that influences where market 
participants intend to trade and, since issuers seek the deepest possible pools of liquidity for 
their securities, that in turn influences where issuers are choosing where to issue88. There is 
therefore a direct link between the move to T+1 and the EU’s ability to remain competitive 
and maintain its attractiveness for investors and issuers alike. 

4. 

CONSULTATION AND STAKEHOLDERS  

In  preparing  this  Staff  Working  Document,  the  Commission  gathered  information  from 
various sources: 

•  ESMA:  as part of the preparation of the report  mandated under Article 74(3) of the 

CSDR, ESMA gathered the views of EU stakeholders through various means: 

o  a  3-month  call  for  evidence  launched  on  5  October  2023  to  which  81 
responses  were  received;  the  feedback  received  was  summarised  and 
published on 21 March 202489; 

86   NSCC clearing fund manages the initial and variable margins deposit by members. See 

https://dtcclearning.com/products-and-services/equities-clearing/nscc-risk-management.html#Clearing-
Fund-Management---NSCC  
statement 

after 
https://www.dtcc.com/news/2024/may/30/dtcc-comments-on-industrys-t1-progress. 

status 

days 

T+1 

two 

87   See  DTCC 

the 

on 

the  US  move. 

88   Several European companies were reflecting on listing their securities in US markets, such for instance Total 
Energies (France), Linde (Germany) or CRH (Ireland). The trend can also be observed in the UK. See  ECB 
paper  Examining  the  causes  and  consequences  of  the  recent  listing  gap  between  the  United  States  and 
Europe. 

89   ESMA74-2119945925-1959 Feedback statement of the Call for evidence on shortening the settlement cycle 

(europa.eu) 

16 

 
 
 
o  a workshop90 organised on 4 December 2023; 
o  a public hearing91 organised on 10 July 2024; 

o  discussions with its consultative groups and industry representatives.  

•  Advisory Group on Market Infrastructures for Securities and Collateral (AMI-
SeCo):  during  its  latest  plenary  meeting  on  26  June  2024,  the  AMI-SeCo,  which 
advises  the  Eurosystem  on  issues  related  to  financial  market  infrastructures, 
underlined that there is a need for a process to i) develop an implementation timetable 
for an EU move to T+1, ii) monitor market preparedness and iii) identify areas where 
solutions  must  be  developed.    A  majority  of  AMI-SeCo  participants  expressed  the 
view  that  the  EU  should  not  wait  for  a  formal  cost-benefit  analysis  and  urged  EU 
decision makers to signal as soon as possible intention to move as well as target date 
for the transition. In addition, the AMI-SECO called for setting up as soon as possible 
a body to coordinate the move92.  

•  European T+1 Task Force: the task force, which includes  a wide representation  of 
members from the buy-side93, sell-side94 and market infrastructures95, was established 
in  July  2023 by market participants  to  seek an industry wide agreement and present 
their views on the impacts of the US transition to T+1 on EU stakeholders and on a 
potential  move  to  T+1  in  the  EU.  It  was  set  up  following  an AFME  report  on  the 
potential benefits and challenges of moving to T+1 in Europe96. The report concluded 
that  many  of  the  benefits  and  challenges  of  a  US  migration  to  T+1  would  also  be 
applicable  to  European  markets.  However,  given  the  nature  of  European  markets 
which,  in  comparison  to  the  US,  have  a  multitude  of  currencies,  market 
infrastructures, and actors to coordinate, the implementation would be more complex 
than in the US. The task force published a second report in October 202497, reiterating 
its  support  for  a  move  to  T+1  in  the  EU,  and  recognising  the  potential  benefits  in 
terms of efficiency improvements and risk reduction. They considered that a move to 
T+1 would be a complex, multi-year undertaking, which requires the collaboration of 
all  industry  stakeholders  to  ensure  that  no  new  risks  are  introduced  or  the  existing 
efficiency,  liquidity  and  functioning  of  EU  securities  market  are  not  damaged.  In 
terms  of  scope,  the  task  force  supported  aligning  to  the  scope  of  the  CSDR,  albeit 

90   See ESMA’s Report 
91   https://www.esma.europa.eu/press-news/hearings/public-hearing-shortening-settlement-cycle. 
92   See minutes of the 25 June 2024 meeting of the Advisory Group on Market Infrastructures for Securities and 
Collateral (Ami-SeCo), item 4 - Potential shortening of the standard securities settlement cycle (T+1). Link: 
https://www.ecb.europa.eu/paym/groups/shared/docs/dbdad-2024-06-25-ami-seco-meeting-outcome-
final.pdf    

93   The  buy-side  consists  of  the market  participants  that  will  be  buyers  of  securities. These  include  insurance 
firms,  mutual  funds,  hedge  funds,  and  pension  funds,  that  buy  securities  for  their  own  accounts  or  for 
investors with the goal of generating a return. 

94   The sell-side refers to the part of the financial markets that will be seller of securities. The sell-side is indeed 
involved  in  the  creation,  promotion,  and  sale  of  stocks,  bonds,  foreign  exchange,  and  other  financial 
instruments. The sell-side consists in investment banks or in market-makers that provide liquidity. 

95   See Terms of reference of the EU T+1 Industry taskforce,  https://www.afme.eu/key-issues/t-1. 
96   See AFME report: T+1  (September 2022):  

https://www.afme.eu/Portals/0/DispatchFeaturedImages/AFME_Tplus1Settlement_2022_04.pdf. 

97   HIGH-LEVEL ROADMAP FOR ADOPTION OF T+1 IN EU SECURITIES MARKETS EUROPEAN T+1 
INDUSTRY  TASK  FORCE  OCTOBER  2024  (https://www.afme.eu/publications/reports/details/high-level-
roadmap-for-adoption-of-t1-in-eu-securities-markets). 

17 

 
 
 
excluding  securities  financing  transactions98.  The  task  force’s  members  generally 
consider that, once a concrete transition date is communicated, a transition period of 
between 24 and 36 months will be required, reflecting the complexity of the market 
infrastructure landscape in the EU. A range of views were expressed as to whether the 
second half of 2027, the date identified for the UK transition, also could be a feasible 
implementation  date  for  the  EU.  The  task  force  remains  highly  supportive  of  a 
coordinated  approach  across  the  entire  European  region,  including  the  EEA,  the 
United Kingdom and Switzerland. 

-  European  Commission:  on  25  January  2024,  the  Commission  organised  a 
roundtable99 on moving to a shorter settlement cycle in the EU. Although a range of 
views were expressed during the roundtable, the majority of participants supported a 
legislative  change  to  move  to  T+1.  They  acknowledged  that  although  a  move  to  a 
shorter  settlement  cycle  can  bring  benefits,  notably  in  the  long  term,  those  benefits 
were  difficult  to  quantify.  They  were  of  the  view  that  short-term  benefits  would 
predominantly materialise through a realignment with other jurisdictions, notably the 
US, and collateral savings, while the main medium- to long-term benefits would be a 
greater  level  of  automation  of  the  whole  settlement  chain  and  the  continued 
competitiveness  of  EU  markets.  The  participants  were  almost  unanimous  about  the 
need for coordination between European jurisdictions; there was also a consensus that 
a  misalignment  between  EU  and  US  was  not  manageable  in  the  long  term.  An 
unscientific poll held during the roundtable on the dates of a potential move showed 
that the majority (54%) supported a 2027/2028 move, while 34% supported an earlier 
move. 12% would favour a later move.  

On  5  September  2024,  the  Commission  organised  a  meeting  of  Member  States’  experts  to 
discuss  a  potential  shortening  of  the  settlement  cycle  in  the  EU.100  The  vast  majority  of 
Member  States  expressed  their  support  for  shortening  the  settlement  cycle  to  T+1  and 
considered  that  a  move  to  T+1  would  lead  to  more  efficient  and  timely  settlement  and 
increase  the  attractiveness  of  EU  capital  markets  for  investors.  Some  Member  States 
expressed  the  view  that  any  reflections  on  a  requirement  for  primary  markets  transactions 
should  be  considered  more  broadly  at  a  later  stage.  Furthermore,  they  considered  that  the 
stability  of  markets  would  improve,  and  liquidity  would  be  more  efficiently  used  due  to  a 
reduction of settlement  related risks and  costs.  Member States were  also  of the view that a 
move  should  be  signalled  through  an  amendment  to  the  CSDR.  They  supported  a 
simultaneous  move  for  all  financial  instruments  rather  than  a  phased  one.  Finally,  they 
stressed  that  for  the  move  to  T+1  to  be  successful,  thorough  preparation,  including  the 
development of a detailed roadmap, would be essential. 

ESMA REPORT ON SHORTENING THE SETTLEMENT CYCLE IN THE EU 

5. 
ESMA’s report, published on 18 November 2024,101 concludes that shortening the settlement 
cycle  to T+1  would  result  in  a  significant  reduction  of  risks  in  the  EU  capital  markets  and 
free up capital no longer required to cover margin calls. It further concludes that moving to 

98   See  High-level  Roadmap  for  adoption  of  T+1  in  EU  securities  markets,  p.  7.  The  European  industry 
considers that SFTs should be explicitly exempted from any T+1 requirement because those transactions are 
not  subject  to  any  standard  settlement  cycle  and  require  full  flexibility  to  ensure  a  smooth  and  liquid 
functioning of the market.  

99   https://finance.ec.europa.eu/events/roundtable-shortening-settlement-cycle-eu-2024-01-25_en 
100  See minutes of the meeting. 
101  ESMA proposes to move to T+1 by October 2027. 

18 

 
 
 
T+1 would also allow EU capital markets to keep up with the evolution of other markets such 
as the US, putting an end to costs linked to the current misalignment of settlement cycles. The 
report  further  points  out  that  a  move  to  T+1  would  also  contribute  to  the  harmonisation  of 
corporate event standards in the EU and more generally contribute to the competitiveness of 
EU  capital  markets. As  regards  the  scope  of  the  move,  the  report  recommends  keeping  the 
existing scope of financial instruments subject to Article 5(2) of the CSDR. In this context, 
the report found no evidence suggesting that the exclusion of SFTs in the scope of T+1 would 
be necessary or desirable. 

At the same time, the report notes that a move to T+1 would represent an important change to 
the way stakeholders operate and  as such it would  require system  upgrades and  changes to 
market  practices  for which investments  will be needed. The  report  acknowledges that costs 
related to these investments would be different for a different range of stakeholders from the 
trade and post-trade chain. 

As evidenced by settlement data (see Annex 5), market infrastructures are already settling a 
large share of transactions at T+1 or faster. To make a wholesale transition to T+1 settlement 
possible,  further  improvements  and  streamlining  of  processes  are  likely  to  be  needed,  but 
remain  to  be  agreed  as  concerning  aspects  such  as  the  trading  and  settlement  schedules, 
different functionalities at the CSDs or T2S or collateral management by CCPs .  

As far as intermediaries are concerned, market players such as broker-dealers, acting on the 
market,  from  facing  end-investors  to  executing  transactions  on  market,  will  have  to  adjust 
their operating model and in particular will have to automate the way they communicate with 
their  clients  and  their  intermediaries  all  along  the  chain  from  the  moment  they  receive  an 
order to be executed. 

Asset managers will be affected by T+1 in two ways: first in their quality as issuers of ETF 
shares/funds units and second in their quality as buyer/seller of securities on the market (and 
lender of securities). To make sure they can operate in a reduced post-trading window, asset 
managers  will have to  do necessary investments  and adapt  the way they  operate today. For 
instance, process and timing relating to the determination of the NAV of funds may have to 
be  optimized.  Many  of  the  changes  required  to  operate  on  T+1  have  as  a  main  objective 
improving settlement efficiency. 

Finally,  corporate  issuers  and  retail  investors  are  not  expected  to  face  investment  costs 
from the shortening of the settlement cycle. 

The report further points out that the majority of the investments that would need to be made 
to move to T+1 would be required anyway to improve settlement efficiency, which remains a 
priority for ESMA and for EU capital markets since the adoption of the CSDR. It therefore 
concludes that the improved efficiency  and resilience of post-trade processes that would be 
prompted  by  a  move  to  T+1  would  facilitate  achieving  the  objective  of  further  promoting 
settlement efficiency in the EU. 

The  report  notes  that  the  final  cost  of  a  transition  to  a  shorter  settlement  cycle,  though 
difficult  to  quantify,  will  depend  on  the  elements  of  the  operationalisation  of  T+1,  which 
remain to be determined. Nevertheless, ESMA’s analysis suggests that the impact of T+1 in 
terms of risk reduction, margin savings and the reduction of costs linked to the misalignment 
with other major jurisdictions globally, represent important benefits for EU capital markets.  

Against  this  background,  ESMA  recommends  that  the  Commission  presents  a  legislative 
proposal  to  reduce  the  maximum  settlement  cycle  from  two  days  to  one  day  for  for 
transactions in transferable securities executed on trading venues (except for transactions that 

19 

 
 
are  currently  exempted  from  the  requirement  under  Article  5(2)  of  the  CSDR).  ESMA 
recommends that the date for the move to T+1 be 11 October 2027.  

6. 

CONTENT OF THE SHORTER SETTLEMENT PROPOSAL 

Article 5(2) of the CSDR requires that for transactions in transferable securities executed on 
trading venues102 , the intended settlement date be no later than on the second business day 
after trading takes place.  
In line with the recommendation from ESMA103 as well as the feedback received from market 
participants and Member States, subject to a decision of the College, it could prove warranted 
to  amend  Article  5(2)  of  the  CSDR,  to  require  that  the  intended  settlement  date  for 
transactions in transferable securities executed on trading venues (except for transactions that 
are currently exempted from the requirement under Article 5(2) of the CSDR) be no later than 
on the first business day after the date on which those securities were traded.  

At this  stage, no other EU level  1 act  appears to  require a change in  line with  the ordinary 
legislative procedure. Nevertheless, a statement was published on 15 October by ESMA, the 
ECB and the Commission (DG FISMA)104 underlining that it is necessary to accelerate every 
aspect of the technical  work needed to pave the way to any future move to T+1 in the EU. 
The three EU authorities also bring forward the desire to reach a consensus among European 
jurisdictions  on  the timing  of  any  move  to T+1. A  governance  structure  will  be  established 
shortly to advance the technical preparation of any future move. It is likely, also taking into 
account  the  market  recommendations,  that  changes  will  be  needed  in  secondary  legislation 
(Delegated  Acts  and/or  RTS/ITSs),  in  addition  to  market  own  initiatives,  to  facilitate  the 
move to T+1. 

7. 

IDENTIFICATION AND ANALYSIS OF IMPACTS 

7.1. 

Identification of impacts and costs 

7.1.1.  Increased automation potentially leading to reduced operational risks and settlement 

fails 

One off investments into greater automation and standardisation of core back office and post-
trade  processes105  will  be  necessary  to  facilitate  a  migration  to  T+1.  The  higher  level  of 
automation should reduce the likelihood on an ongoing basis that errors occur or, if they still 
occur, the automation should enable them to be identified, detected and solved more quickly 
in  order  to  avoid  settlement  fails.  These  investments  should  therefore  also  contribute  to  a 
greater  settlement  efficiency  and  productivity  while  reducing  operational  risks.  Such 
investments are also an opportunity to apply new technologies and improve the efficiency of 
post-trade  markets  more  generally,  contributing  to  the  digital  agenda. At  the  same  time,  if 
sufficient  investments  into  automation  of  processes  are  not  undertaken  by  all  stakeholders, 
there is  a risk that settlement  efficiency  and productivity could  deteriorate when shifting to 

102  Except transactions which are negotiated privately but  executed on a trading venue, transactions which are 
executed bilaterally but reported to a trading venue and the first transaction where the transferable securities 
concerned are subject to initial recording in book-entry form pursuant to Article 3(2) of CSDR. 

103  ESMA report on shortening the settlement cycle, page 6, 64, 66, 69, 89.  
104  Shortening the standard securities settlement cycle in the European Union: next steps - European 

Commission (europa.eu) 

105  According  to  a  global  survey  conducted  in  June  2024  on  the  impact  of  north American  transition  to T+1, 
90%  of  respondents  were  heavily  engaged  in  internal  process  automation  over  the  previous  year. 
Citi_Securities_Services_Evolution_2024.pdf (citibank.com) 

20 

 
 
 
T+1.106  These  risks,  and  potential  costs,  can  however  be  mitigated  through  thorough 
preparations and adequate time for testing by all market participants. While, in the short term, 
it  would  be  possible  to  cope  with  shortened  settlement  processes  through  increases  in  the 
number of staff (there is anecdotal evidence that this happened in the case of the US move), it 
is unlikely that this approach would be sustainable in the medium to long term. 

7.1.2.  Risk reduction and lower CCP margin requirements 

A  shorter  settlement  cycle  reduces  counterparty  risk  and  market  risk  (the  risk  linked  to 
potential  market  volatility  between  the  moment  a  trade  is  executed  and  the  moment  it  is 
settled)  and  thus  reduces  the  collateral  (i.e.  margin)  requirements  for  centrally-cleared 
transactions. According to ESMA estimates, open positions on cleared securities transactions 
are expected to be reduced by approximately EUR 30 000 million for equity related products 
and EUR 25 000 million for bonds. This would result in significant initial margin reductions 
across  bond  and  equity  markets  on  an  ongoing  basis,  freeing  up  liquidity  for  clearing 
participants active on these markets. The  estimated reduction amounts to 42%  (EUR 2 400 
million) of margin requirements with approximately 80% of the benefits linked to equity and 
the remaining 20% mostly linked to government bonds. Results vary slightly across markets 
and  CCPs  but  overall  show  a  consistent  picture  of  reductions  between  38%  and  49%.107 
Moreover,  the  reduction  of  settlement  related  risks  would  also  contribute  to  the  overall 
systemic financial stability.  

7.1.3.  Other benefits 

The misalignment of settlement cycle creates risks and administrative costs in relation to the 
management of different key dates for corporate events related to securities listed or traded 
simultaneously in T+1 and in the EU. Removing that misalignment will remove those costs, 
which  in  itself  represents  a  benefit  for  EU  capital  markets  generally,  but  specifically  for 
investors and issuers. 

In addition, as moving to T+1 settlement is rapidly becoming the global norm, the EU capital 
markets  would look  obsolete and inefficient if they continued to operate T+2 (according to 
ESMA analysis, the liquidity of EU ETFs invested in US equities has declined following the 
US move to T+1108). Ignites Europe analysis109 of Morningstar data published on 14 August 
2024 shows that, since the settlement cycle was shortened in the US, average total returns for 
Europe-domiciled funds investing in US equities have been lower than for US vehicles in the 
same asset class.  

7.1.4.  Investment needs 

There are technical challenges to  overcome prior to  an official move to T+1 in  the EU. As 
mentioned above, greater automation and  standardisation of core back-office and post-trade 

106   Feedback received by ESMA following the shift to T+1 in North America suggests that many stakeholders 
have prioritised investing in workforce to cover the  immediate  needs resulting from the shift to T+1. This 
feedback  equally  suggests  that  this  choice  is  temporary,  and  that  further  standardisation  of  processes  and 
automation  should  be  pursued  to  deal  with  faster  settlement.  According  to  a  survey  conducted  by  Value 
Exchange,  following  the  move  to  T+1  in  North  America  staff  costs  of  brokers,  custodians  and  investors 
increased  by  10-13%  in  Europe  (Accelerated  Settlements  and  T+1  -  Welcome  to  the  ValueExchange 
(thevx.io)). 

107  Report on ESMA assessment of the shortening of the settlement cycle in the European Union 
108  See Annex 3 
109 ”European fund performance significantly lags behind US peers after T+1”, ETF Hub, Financial 
Times, 19 August 2024. Link: https://www.ft.com/content/47b75ff1-a6a6-4f26-ba86-943298236523 

21 

 
 
 
processes  by  market  participants  will  be  needed.  Market  infrastructures  will  also  need  to 
make certain changes to their systems. These will inevitably require substantial investments. 
ESMA estimates that the aggregated implementation costs for all custodian banks affected by 
the move to T+1 could  represent  between  EUR 1600 million  and  EUR 5300 million110 and 
the related ongoing costs of up to EUR 265 million but emphasises that this estimation should 
be considered with caution as a significant part of these costs is required in any case for the 
implementation  of  measures  to  increase  settlement  efficiency.  At  the  same  time,  increased 
automation and productivity should allow for a reduction in staff expenses.  

7.1.5.  Possible challenges for securities financing transactions 
A  shorter  settlement  cycle  can  affect  the  securities  lending  market.  Market  makers111  will 
need  to  adjust  their  operations  to  meet  the  shorter  settlement  timeframe  when  they  borrow 
securities  in  order  to  be  able  to  return  them  in  a  timely  manner  if  required.  Otherwise,  if 
lenders  fear  not  being  able  to  receive  securities  back  on  time  to  ensure  the  settlement  of 
transactions,  liquidity  in  securities  lending  markets  could  potentially  decline,  negatively 
affecting the ability of market makers to provide liquidity to the market.  

In  the  UK,  the  Accelerated  Settlement  Taskforce,  suggested  in  the  Technical  Group  draft 
recommendations  report  &  consultation  to  keep  the  current  scope  of  the  settlement  cycle 
unchanged  while  adding  specific  exemptions  for  Eurobonds  and  ETFs  with  underlying 
securities  settled  in  the  EU112.  However,  the  Taskforce  recommended  that  the  market 
convention (for OTC transactions) should not include any requirement pertaining to T+1 for 
SFTs because they consider that those transactions do not have a standard settlement cycle113. 
SFTs  may  indeed  be  either  traded  OTC  or  on  exchange. The  former  is  therefore  out  of  the 
scope of the requirement set out in Article 5(2) of the CSDR114 while the latter would be in 
the scope of a possible transition, but only to the extent that these transactions are conducted 
on an exchange. Similarly, ESMA’s report on shorter settlement concludes that SFTs should 
not be excluded from the current scope of Article 5(2) of the CSDR.  

According  to  ESMA’s  assessment  of  the  evolution  of  securities  lending  markets  in  the  US, 
which did not exclude SFTs from the scope of T+1, the overall number and value on loan of 
US securities remained stable around the move to T+1 and in the months immediately after. 
No sudden shifts were observed around the implementation date. The value of ETFs on loan, 
despite showing higher volatility, remained in line with long-term levels.115 

7.1.6.  Transactions in foreign currencies (FX) 

110 In comparison the EU banking industry total operating income in 2023 amounted to EUR 760 000 million. 
See Statista, Total operating income of the banking industry in the European Union from 2015 to 2023.  
111  “Market  maker”  means  a  person  who holds  himself out on  the  financial  markets  on  a continuous  basis  as 
being  willing  to  deal  on  own  account  by  buying  and  selling  financial  instruments  against  that  person’s 
proprietary capital at prices defined by that person. See Art. 4(7), Directive 2014/65/EU (MiFID2). 

112  See Accelerated Settlement Taskforce, Technical Group draft recommendations report & consultation p.3 
113  Idem p.13 
114  As regards the settlement cycle, the current rules applicable in the UK and in the EU are the same and set out 
in Article 5(2) of the UK CSDR in the UK, and in Article 5(2) of Regulation (EU) 909/2014, CSDR, in the 
EU.   

115  According  to  a  global  survey  conducted  in  June  2024  on  the  impact  of  north American  transition  to T+1, 
50%  of  respondents  reported  that  it  had  a  significant  impact  on  their  securities  lending  activities.  
Citi_Securities_Services_Evolution_2024.pdf (citibank.com) This was confirmed by the SIFMA, ICI and the 
DTCC “T+1 After Action Report” which concluded that: “The transition to T+1 settlement has significantly 
impacted securities lending recall timing, necessitating adjustments in operational practices and systems to 
accommodate the accelerated settlement cycle.” 

22 

 
 
 
Settlement in T+1 might be challenging for trades settled against a currency different to the 
one held by the buyer which thus needs to convert his cash first. This might in particular be 
the  case  for  investors  in  different  time  zones  and  for  less  liquid  currencies.  For  example, 
investors based in Asia investing in EU securities settling on T+1 might need to adjust their 
processes in order to be able to settle in EUR (or any other relevant European currency). As 
shown  by  the  EU  investors  investing  in  the  US,  different  solutions  might  be  available: 
prefunding,  executing  FX  trades  before  confirmation  of  the  securities  transaction,  bilateral 
FX  trading,  auto  forex  and  other  solutions  provided  by  third  parties  such  as  custodians. 
Following the shift to T+1 in the US, it seems that the evolution in market practices allowed 
for the mitigation of the negative impacts expected prior to the move.116  

7.1.7.  Overall impacts 

Overall,  the  expected  benefits,  such  as  increased  automation  and  efficiency,  risk  reduction, 
lower  margin  requirement  and  elimination  of  misalignment-related  costs  and  frictions, 
should,  over  time,  largely  outweigh  mostly  one-off  costs  stemming  from  necessary 
investments that a move to T+1 would entail.  In particular, over the long term, moving to a 
shorter settlement cycle should prevent the EU capital market falling further behind its main 
international competitors. As an increasing share of the global capital markets moves to T+1 
settlement the main benefits of more efficient settlement, as evidenced by the US transition, 
will  make  themselves  felt,  i.e.  lower  collateral  requirements,  greater  liquidity  and  more 
efficient  settlement.  Remaining  at T+2  would be to  the detriment  of  competitiveness  of the 
EU  capital  market.  Indeed,  there  is  some  evidence  that  the  recent  listing  gap  between  the 
United  States  and  Europe  is  due,  at  least  in  part,  to  the  greater  attractiveness  of  US  stock 
markets  for  foreign  firms117.  Higher  market  depth  is  given  as  one  of  the  reasons  for  this 
development.  If  the  listings  gap  between  EU  and  US  stock  markets  were  to  widen  further, 
particularly for larger firms, this would likely exacerbate existing differences in market depth 
and liquidity.  

7.2. Impact on different stakeholder groups  

Corporate  issuers  would  not  incur  additional  costs  from  the  shortening  of  the  settlement 
cycle. At the same time, they would rather see an increased transparency in the ownership of 
the  dual-listed  shares  they  issue  (provided  that  one  of  the  listings  is  executed  in  a  T+1 
environment)  and  would  also  indirectly  benefit  from  the  transitions  as  it  would  ensure  that 
their securities are still traded in an efficient and attractive environment118.  

Retail  and  other  investors  should  clearly  benefit  from  a  shorter  settlement  cycle.  When 
investing in capital markets they will be able to receive purchased securities or cash for sold 
securities  faster  and  thus  face  lower  counterparty  and  market  risks.  However,  if 
intermediaries decide to pass-on the adaptation costs of moving to T+1 to retail investors, the 
latter  will  face  increased  fees119  for  their  trading  in  a  T+1  environment.  The  size  of  the 
increase  would  then  depend  on  the  competition  between  intermediaries  offering  those 

116  See  Report  on  ESMA  assessment  of  the  shortening  of  the  settlement  cycle  in  the  European  Union,  p.35 

§106. 

117  ”Examining the causes and consequences of the recent listing gap between the United States and Europe”, 

Financial Integration and Structure in the Euro area 2024, ECB. 

118  See Section 3.2  
119  There is so far no evidence that fees for US retail investors active in capital markets increased following the 

US move to T+1.  

23 

 
 
 
services.  The  shorter  settlement  cycle  is  not,  however,  expected  to  require  additional 
investments or operational expenditure from end-investors 120. 

Increased alignment with other markets operating in T+1 will imply a significant streamlining 
of processes for  all cross-border market  participants.  In particular,  fund managers will not 
need to cover the financing gaps between investment in securities trading under T+1 and the 
settlement of their fund shares in T+2 and between selling securities in T+2 and purchasing 
securities  under  T+1.121  These  misalignment-related  funding  costs  would  substantially 
increase should the UK  and Switzerland move to T+1 sooner than the EU.  Conversely, the 
size of the impacts of a move to T+1 on the Member States’ funds industry will depend on the 
structure  of  that  industry.  Member  States  with  funds  mainly  distributed  and  settled 
domestically will face less pressure than those with funds distributed and settled cross-border. 
This  is  because  the  former  have  a  distribution  chain  that  is  shorter,  with  fewer  actors 
involved. It will therefore be more challenging for funds in Member States like Ireland and 
Luxembourg, which have a high level of cross-border activity (see Table 2 below and Annex 
4  for  further  details),  to  settle  within  the  intended  settlement  date  or  otherwise  face  cash 
penalties as set out in the CSDR than for funds established in France or in Germany. On the 
other hand, these funds should benefit more from the reduction in misalignment costs related 
to  managing  securities  trading  under  different  settlement  cycles,  including  the  liquidity 
mismatch (see Section 3.2).  

Market  infrastructures  are  already  capable  of  settling  at  T+1  or  faster,  as  evidenced  by 
settlement data (See Annex 5). Nevertheless, preliminary analyses on the impact on market 
infrastructures  show  that  further  refinement  of  trading  and  settlement  schedules,  different 
functionalities which might be required at the CSDs or T2S, collateral management by CCPs 
and,  potentially,  real-time  settlement  in  T2S  may  be  necessary  to  operationalise  T+1.  This 
work was first done by the EU Industry Task Force and will be taken over by the EU Industry 
Committee.   

Table 2: Top UCITS and AIFs assets under management by EU Member State domiciliation 
(in EUR billion): 

EU Member State 

Assets under 
Management 

Share of cross-border 
funds 

Luxembourg 

Ireland 

Germany 

France 

Netherlands 

Sweden 

Italy 

5,285 

4083 

2653 

2277 

826 

585 

373 

87% 

90% 

8% 

12% 

10% 

6% 

11% 

120  For example, retail investors have to pre-fund their trades, i.e. they need to have cash or securities in their 
accounts  at  the  moment  of  the  trade,  so  a  move  to  T+1  or  even  to  T+0  would  not  require  any  additional 
efforts on their part. 

121  According  to  a  global  survey  conducted  one  month  after  the  North  American  transition  to  T+1,  asset 
managers  have  seen  their  funding  costs  worsen,  as  46%  of  them  have  had  to  cover  significant  gaps  in 
settlements  between  T+2  and  T+1  markets  and  in  their  funds’  subscription  and  redemption  cycles. 
Citi_Securities_Services_Evolution_2024.pdf (citibank.com) 

24 

 
 
 
Source: EFAMA Fact Book 2024 (see Annex for more details) 

Commission services reached out to financial intermediaries to collect evidence on the nature 
and the amount of necessary investments. However, very little quantitative evidence has been 
provided.122  Nevertheless,  two  large  EU  banking  groups  estimated  the  total  cost  for  the 
operational  changes necessary for their transition  in  the EU of EUR 4 million  and EUR 10 
million respectively123. This estimation includes the additional human resources necessary for 
ensuring the smooth operations in T+1. It should, however, be kept in mind that investment 
needs vary among custodians depending on their business models, the number of CSDs and 
CCPs  they  are  connected  to  and  whether  previous  investments  have  been  done  to  comply 
with  T+1  in  other  jurisdictions  or  to  improve  their  settlement  processes  in  general.  In 
addition, Member States, where large custodians are established (e.g. France, Germany, Italy, 
Netherlands)  are  expected  to  benefit  most  from  the  required  investments  into  greater 
automation of core back office and post-trade processes. It  will be indeed easier for market 
participants connected to the same custodians to  settle in a shorter time. The final cost will 
also depend on the elements of the operationalisation of T+1 which remain to be determined.   

Broker-dealers that are active on EU markets would also avoid facing potential competitive 
disadvantages compared to other intermediaries active in T+1 jurisdictions.  

8. 

CONCLUSIONS 

There  is  a  clear  international  momentum  towards  T+1  settlement.  Already  today, 
approximately  60%  of  global  market  capitalisation  is  settled  in  T+1.  Once  the  UK  and  the 
Asia-Pacific  jurisdictions  that  have  announced  their  future  transition  will  have  officially 
shifted,  this  will  amount  to  75%  of  the  world  market  capitalisation  being  settled  in  T+1. 
Given the level of interconnectedness among European capital markets such as the UK and 
Switzerland  and  the  significant  costs  for  EU  stakeholders  that  would  stem  from  a 
misalignment in the settlement cycles of those markets, a degree of coordination in the shifts 
to T+1 of capital markets in Europe would be preferrable.  

Greater  automation  and  standardisation  of  core  back-office  and  post-trade  processes, 
including a substantial increase in the use of straight-through processing, is needed to enable 
the move to T+1. This will require investments. The magnitude of the investment needs will 
vary from one market participant to another depending on their business model, the number 
of CSDs and CCPs they are connected to and whether previous investments have been made 
to  comply  with  T+1  in  other  jurisdictions.  It  should  also  be  pointed  out  that  market 
participants  will  need  to  make  some  of  those  investments  anyway  as  part  of  the  drive  to 
increase  settlement  efficiency  in  the  EU.  These  one-off  costs  should,  over  time,  be 
outweighed by the long-term benefits of lower counterparty and market risks, more efficient 
and timely settlement and increased attractiveness of EU capital markets for investors.  

ESMA  prepared  a  report  assessing  the  costs  and  benefits  and  a  roadmap  to  a  shorter 
settlement  cycle  in  the  EU.  It  concluded  that  shortening  the  settlement  cycle  to T+1  would 
result in a significant reduction of risks in the market and free up capital no longer required to 
cover margin calls. T+1 would also allow EU capital markets to keep up with the evolution of 
other markets such as the US, putting an end to costs linked to the current misalignment of 
settlement cycles. It would also contribute to the harmonisation of corporate event standards 
in the EU and more generally contribute to the competitiveness of EU capital markets.  

122  Out of 16 stakeholders consulted, only 2 provided figures.  
123  Based  on  confidential  information  provided  to  DG  FISMA  services.  The  amount  is  estimated  by  banking 

group.   

25 

 
 
 
The  costs  for  EU  of  remaining  on  T+2  would  be  considerable.  Firstly,  over  time  it  would 
remain  the  only  advanced  capital  market  to  still  operate  a  longer  settlement  cycle  bringing 
with it a loss of competitiveness and damaging its reputation among investors globally. The 
evolution towards real-time finance, as evidenced by growing uptake of instant payments or 
digital finance, will only fuel the perception of a EU capital market out of step with its former 
peers. On a practical  level,  the EU capital  market  will forego the benefits  of more efficient 
transactions, lower margin requirements or increased liquidity, as evidenced by the successful 
T+1 US transition in May. Coupled with the likely decrease in foreign investments in the EU 
capital market, staying at T+2 will result in less liquid and shallow EU capital market, going 
against  the  long-term  objective  of  EU  policy  in  the  area.  Furthermore,  less  liquid  capital 
markets  will  drive  away  EU  innovative  and  growth  enterprises  seeking  finance  to  non-EU 
markets.  At  the  same  time,  remaining  at  T+1  will  not  spare  EU  investors  the  costs  of 
adjusting to T+1. As T+1 will relatively quickly become the global norm in settlement, EU 
market  participants  will  need  to  bear  the  extra  costs  of  operating  two  different  settlement 
processes. The negative impacts on performance are already evident124.  

To conclude, T+1 is a global trend. It will entail costs for market participants as investments 
will  be  required  to  modernise,  digitalise  and  streamline  processes.  Given  the  fragmented 
nature  of  EU  capital  markets,  the  fact  that  coordination  and  cooperation  of  market 
participants  is  not  only  useful  but  essential  to  ensure  a  smooth  move  to  T+1,  provides  an 
impetus  to  take a fresh  look  at  the standards, processes and technologies  used in  post-trade 
services, to embrace innovation and build more efficient capital markets.  

124 See footnote 110. 

26 

 
 
 
 
 
Annex 1: Glossary 

For the purposes of this document, the following definitions apply:  

Central 
counterparty (CCP)  

An entity that interposes itself, in one or more markets, between the 
counterparties to  the contracts  traded, becoming the buyer to  every 
seller and the seller to every buyer. 

Collateral 

Corporate action 

CSD 

CSDR 

Custodian or 
custodian bank 

DVP 

EBA 

ECB 

ECSDA 

EEA 

EFAMA 

ESCB 

ESMA 

ICMA 

ISD 

An  asset  or  third-party  commitment  that  is  used  by  the  collateral 
provider  to  secure  an  obligation  to  the  collateral  taker.  Collateral 
arrangements  may  take  different  legal  forms;  collateral  may  be 
obtained using the method of title transfer or pledge. 

A  corporate  action  is  an  event  initiated  by  a  public  company  that 
brings  or  could  bring  an  actual  change  to  the  securities—equity  or 
debt—issued by the company, such as stock splits, mergers, dividend 
payments.  The  role  of  the  CSD  is  to  inform  CSD  participants 
holding  the  respective  security  in  custody  about  the  upcoming 
corporate action. 

Central  Securities  Depository.  A  legal  person  that  operates  a 
securities settlement system and provides at least a notary service or 
a central maintenance service. 

Regulation (EU) No 909/2014 of the European Parliament and of the 
Council on improving securities settlement in the EU and on central 
securities depositories 

An entity, often a credit institution, which acts as "account provider" 
and provides securities custody services to its customers, i.e. holding 
and administration of securities owned by a third party. 

Delivery versus payment. A securities settlement mechanism which 
links a transfer of securities with a transfer of cash in a way that the 
delivery of securities occurs if and only if the corresponding transfer 
of cash occurs and vice versa. 

European Banking Authority 

European Central Bank 

European Central Securities Depositories Association 

European Economic Area 

European Fund and Asset Management Association 

European System of Central Banks 

European Securities and Markets Authority 

International Capital Markets Association 

Intended  Settlement  Date.  Means  the  date  that  is  entered  into  the 
securities settlement system as the settlement date and on which the 
parties  to  a  securities  transaction  agree  that  settlement  is  to  take 
place. 

Margin  

An asset (or third-party commitment) accepted by a counterparty to 

27 

 
 
OTC 

Primary Market 

ensure  performance  on  potential  obligations  to  it  or  cover  market 
movements on unsettled transactions.  

"Over-the-counter" (or OTC) can be used to refer to stocks that trade 
via  a  dealer  network  as  opposed  to  on  a  regulated  market.  It  also 
refers  to  debt  securities  and  other  financial  instruments  such  as 
derivatives, which are traded through a dealer network. 

A  section  of  the  capital  market  where  financial  instruments,  stocks 
and  bonds,  are  issued/sold/floated  for  the  first  time  by  companies, 
governments or public institutions. After issuance these instruments 
are traded in the secondary market. 

Securities settlement 
system 

A  system  which  allows  the  transfer  of  securities,  either  free  of 
payment (FOP) or against payment (delivery versus payment).  

Settlement 

Settlement cycle  

Settlement failure 

Settlement 
internaliser 

The completion of a securities transaction where it is concluded with 
the  aim  of  discharging  the  obligations  of  the  parties  to  that 
transaction through the transfer of cash or securities, or both. 

For the purposes of this document exclusively, means the settlement 
period  for  the  majority  of  financial  markets  transactions  in  a  given 
jurisdiction.  

Any  reference  in  this  document  to  the  shortening  of  the  settlement 
cycle in the EU, unless otherwise specified in the relevant section of 
the  document,  is  made  to  the  settlement  cycle  for  transactions  in 
transferable  securities  executed  on 
the 
exception  of  transactions  which  are  negotiated  privately  but 
executed  on  a  trading  venue,  transactions  which  are  executed 
bilaterally  but  reported  to  a  trading  venue  and  the  first  transaction 
where  the  transferable  securities  concerned  are  subject  to  initial 
recording in book-entry form (i.e. the scope of transactions set out in 
Article 5(2) of CSDR). 

trading  venues,  with 

The  inability  of  a  participant  to  a  Securities  Settlement  System  to 
meet  its  settlement  obligations in  the Securities  Settlement  System. 
This inability may be temporary or permanent. 

An  institution,  which  may  be  authorised  in  accordance  with 
Directive  2013/36/EU  or  with  Directive  2014/65/EU,  which 
executes  transfer  orders  on  behalf  of  clients  or  on  its  own  account 
other than through a securities settlement system 

Settlement period 

Means the period between the trade date and the intended settlement 
date for a securities transaction.  

SFTs 

Securities  Financing  Transactions  allow  investors  and  firms  to  use 
assets, such as the shares or bonds they own, to secure funding for 
their activities. A securities financing transaction can be: 

- 

- 

a  repurchase  transaction  -  selling  a  security  and  agreeing  to 
repurchase it in the future for the original sum of money plus 
a return for the use of that money 
lending  a  security  for  a  fee  in  return  for  a  guarantee  in  the 
form of financial instruments or cash given by the borrower 

28 

 
 
SIU 

T2S 

UCITS 

- 
- 

a buy-sell back transaction or sell-buy back transaction 
a margin lending transaction 

Savings and Investments Union 

Target2-Securities.  The  Eurosystem's  single  technical  platform 
enabling  CSDs  and  national  central  banks  to  provide  core, 
borderless  and neutral  securities settlement  services in  central  bank 
money in Europe. 

Undertaking  for  Collective  Investment  in  Transferable  Securities. 
UCITs  are  an  undertaking:  (a)  with  the  sole  object  of  collective 
investment  in  transferable  securities  or  in  other  liquid  financial 
assets raised from  the public and which operate  on the  principle of 
risk-spreading;  and  (b)  with  units  which  are,  at  the  request  of 
holders, repurchased or redeemed, directly or indirectly, out of those 
undertakings’  assets.  See  Directive  2009/65/EC  of  the  European 
Parliament and of the Council of 13 July 2009 on the coordination of 
laws, 
to 
undertakings  for  collective  investment  in  transferable  securities 
(UCITS). 

regulations  and  administrative  provisions 

relating 

29 

 
 
 
Annex 2: Map of countries by settlement cycle 

Note: Year indicates when the current settlement cycle was implemented. [China follows an approach where different settlement cycles coexist according to the segmentation 
of the Chinese equity market and the status of the counterparties to bond trades. For so-called A shares, mainland China currently settles securities on trade date (T0) and cash 
on the following business day (T+1). B shares equity markets follow a longer settlement cycle where trades must settle within 3 days after trade date (T+3). The standard 
settlement cycle in the China Interbank Bond Market can be T0 or T+1. There is no fixed settlement cycle in the Russian market but Moscow Exchange (MOEX) transferred 
trading in shares and bonds to a single T+1 settlement cycle on 31st July 2023.] 

30 

 
 
 
Annex 3: Detrimental effects of US T+1 move on the competitiveness of EU ETFs 

ESMA  monitored  developments  in  the  EU  ETF  market  by  employing  data  and  analysing  a 
specific  indicator,  the  premium  to  Net  Asset  Value  (NAV)  of  the  most  relevant  EU-listed 
funds  that  invest  in  US  equities.  For  a  complete  approach,  the  largest  EU-domiciled  ETFs 
investing in EU equities were also added to the analysis, in order to provide a counterfactual. 
The  analysis  covered  the  largest  100  EU  ETFs  invested  in  US  equity  and  the  largest  50 
invested in EU equity, focusing on the period between September 2022 and September 2024 
(last data point considered: 24th September 2024). The analysis focused on premium to NAV 
to monitor whether the move to T+1 negatively impacted the arbitrage activity on ETFs and 
the liquidity of these instruments125. 

The  liquidity  of  EU  ETFs  invested  in  US  equities  has  decreased  after  the  US  transition  to 
T+1. The average premium/discount to NAV of EU ETFs increased in correspondence of the 
T+1 move and in the months immediately before. Funds investing in US securities showed, 
on  average,  a  higher  premium  in  June  2024  and  in  3Q24  (+22%  and  +33%,  respectively, 
compared  to  1Q24  -  Chart  1).  Benchmarking  these  developments  to  premiums  of  ETFs 
investing  in  EU  equities,  the  latter  were  not  as  large  (+16%  and  +18%,  respectively, 
compared  to  1Q24).  Moreover,  the  premium  of  ETFs  investing  in  EU  securities  (2.8%,  on 
average,  in  3Q24)  reached  a  level  significantly  lower  than  those  investing  in  US  securities 
(3.9%), albeit displaying a slight increase over the observation period.  

In conclusion, moderate negative impacts on ETF liquidity have been observed in the months 
immediately after the T+1 implementation date. This evidence could signal reduced arbitrage 
activity  on  these  instruments  and,  consequently,  lower  liquidity.  Overall  premiums  for  EU 
ETFs  increased  on  average,  with  relevant  upward  shifts  observed  for  EU-listed  funds 
investing in US equities. Nevertheless, liquidity deteriorated also for the control group (ETFs 
investing in  EU equities), albeit  less significantly. In addition,  the graph below evidences a 
growing gap between EU and US premiums to NAV which shows no sign of closing. Further 
analysis is needed to better understand longer-term developments on EU ETF markets. 

𝑃𝑡−𝑁𝐴𝑉𝑡
𝑁𝐴𝑉𝑡

125  Premium  to  NAV  defined  as  𝑝𝑡 = |

| ,  where  𝑃𝑡  is  the  price  of  one  share  of  the  ETF  on  date  𝑡  and  
𝑁𝐴𝑉𝑡  is  the  net  asset  value  per  share.  This  measure  captures  the  discrepancies  (in  absolute  terms  –  be  it 
premiums  or  discounts)  between  the  market  value  of  the  ETF  and  that  of  its  constituents.  When  these 
discrepancies arise, market participants usually engage in arbitrage trades that close the gap between the two 
prices. The efficacy of the arbitrage mechanism is related to the fund liquidity and that of its constituents  - 
.see Rappoport et al. (2020).   

31 

 
 
 
 
 
Chart 1: Premium to NAV (average) 

Steeper increase for US-invested ETFs 

The  reference  period  used  for  this  assessment  (between  the  shift  to  T+1  in  the  US  and  the 
publication  of  this  SWD)  is  relatively  short.  This  assessment  should  in  consequence  be 
looked at cautiously. However, when put together with feedback from the asset management 
industry, there seems to be grounds to believe that there is indeed a negative impact for the 
asset  management  industry  due  to  the  misalignment  of  settlement  cycles  with  the  US. This 
effect is also (very) likely to be passed onto individual investors who often use ETFs as  an 
accessible and lower-cost investment vehicle, as ESMA’s SMSG observes. 126 

126  See SMSG Advice to ESMA p. 28. 

32 

00.010.020.030.040.050.06Sep-22Mar-23Sep-23Mar-24Sep-24T+1 implementationUS (mean)EU (mean)Note:MonthlyaveragepremiumtoNAV,inabsolutevalue,byturnovervolumesinJune2024.US:first100EUETFsinvestedinUSequity.EU:first50EUETFsinvestedinEUequity.Lastdatapoint:September2024.Sources:RefinitivDatastream,ESMA. 
 
 
 
 
 
Annex4 : UCITS and AIFs assets under Management (AuM) by EU domiciliation (EUR 
103 million) 

EU Member State 

Asset under Management 

Share of cross-border funds 

Luxembourg 
Ireland 
Germany 
France 
Netherlands 
Sweden 
Italy 
Spain 
Denmark 
Austria 
Belgium 
Finland 
Poland 
Hungary 
Portugal 
Czech Republic 
Malta 
Greece 
Slovakia 
Romania 
Cyprus 
Slovenia 
Croatia 
Bulgaria 
Source : EFAMA Factbook, data for end of year 2023.  

5285 
4083 
2653 
2277 
826 
585 
373 
364 
275 
211 
202 
150 
74 
37 
33 
27 
20 
19 
10 
7 
6 
6 
3 
1 

87% 
90% 
8% 
12% 
10% 
6% 
11% 
3% 
5% 
13% 
21% 
22% 
19% 
4% 
22% 
6% 
84% 
13% 
6% 
6% 
41% 
3% 
4% 
4% 

33 

 
 
 
 
Annex 5: Value of transactions that settle on T+0, T+1, T+2 and beyond127 

127 Based on ”ESMA assessment of the shortening of the settlement cycle in the European Union”, [ESMA, 18 
November 2024], Chapter 6.4 for share of ”T+0“, ”T+1“, ”T+2 and longer” settlement on T2S and outside T2S, 
broken down by instrument type and transaction type.  

34 

 
 
 
 
 
 
 
35