ESMA calls on firms to finalise preparations ahead of transition to T+1 settlement cycle

The European Securities and Markets Authority (ESMA) has published a statement highlighting key deadlines and action points for firms to take when preparing for the transition to a T+1 settlement cycle, which takes effect on 11 October 2027. ESMA states that while readiness surveys conducted by the EU T+1 Industry Committee show an overall good and increasing level of awareness and commitment to the transition, implementation levels remain uneven across EU financial markets, sectors and firms.

While the rules have been known since mid-October last year, ESMA proposed amendments to Commission Delegated Regulation (EU) 2018/1229 to set new requirements, which are particularly relevant for the transition to T+1. ESMA states that firms should consider these in combination with the recommendations of the EU T+1 Industry Committee and accelerate the technical work needed to prepare for the transition to T+1 settlement. The statement also highlights the following key compliance deadlines:

• First deadline: 7 December—for the requirements to improve the first post-trade step, the exchange of allocations and confirmations, in terms of timing and through the default use of international communication standards.
• Final deadline: 11 October 2027—for the requirements to optimise the settlement layer, including sending instructions early enough to securities settlement systems, and the generalisation of certain functionalities in central securities depositories (CSDs), such as auto-partial settlement, hold and release, and auto-collateralisation.

ESMA and the national competent authorities are in the last stages of reviewing the Level 3 guidelines on allocations and confirmations. ESMA considers that the guidelines and the Committee's recommendations will give firms a clear basis for finalising their implementation of electronic, standardised and timely allocation and confirmation processes.

ESMA states that different implementation strategies are possible and firms should undertake thorough analysis and planning, prioritise automation and standardisation, consider new partnerships where relevant, and ensure timely data quality (including correct reference data and standard settlement instructions).

ESMA also reiterates that no-one can be ready in isolation. Firms should assess the readiness of their entire ecosystem, up and down the trading and settlement chain—clients, brokers, custodians, CSD participants, CSDs, central counterparties, trading venues, vendors and outsourcing providers—to enable early testing, identify defects and reduce disruption risk at go-live on 11 October 2027. The regulator warns that insufficient preparedness could trigger significant operational and reputational risks, including flawed interdependencies with financial market infrastructures and IT providers, inability to meet client demands, and higher IT and training costs from last-minute remediation.

Return to main website.