The EU looks set to move to a T+1 settlement cycle by the end of 2027 as it looks to align with the UK’s timetable.
In a consultation held by the European Securities Markets Authority (ESMA) on 10 July, 70% of participants said they would like to see a shortened settlement cycle by the end of 2027.
EU officials said the move would be “feasible” and saw “no roadblocks” to the move, according to financial publication The Banker.
It comes after the US moved to a T+1 settlement cycle in May, leading to concerns around misalignment between European and US markets.
The UK government previously said it would look to coordinate its move to a T+1 cycle with the EU, noting the benefits of a harmonised approach for market participants.
However, fears that the EU would not move in time for the UK’s deadline have surfaced in recent months, with the fragmented nature of the European market and a new European Commission likely to delay the project.
A lack of harmonisation on settlement times would likely cause chaos for ETFs in Europe, most of which are listed across the UK and Europe.
The impact of the US move to T+1 on ETFs in Europe has yet to be seen, however, the move did spark concerns European issuers risk falling foul of UCITS cash and overdraft rules while authorised participants (APs) are to be hit with additional funding burdens.
ESMA has taken a wait-and-see approach to the impact the move will have on markets, rejecting calls to change UCITS rules over the changes.
