In a bid to expedite share transactions and keep pace with Wall Street, Britain plans to implement faster completion of share transactions, with a phased approach that allows market participants to adapt gradually, according to the chair of a government-commissioned review.
Starting from the end of May, shares traded in the United States, Canada, and Mexico will be settled in just one business day (T+1), in contrast to the current two-day settlement period on Wall Street and in Europe.
Charlie Geffen, chair of Britain’s Accelerated Settlement Taskforce, emphasized that the question is not if, but how and when this transition will occur, stating, “The question of how and when, and not if, is pretty universally held.”
Geffen’s forthcoming report, scheduled to reach the finance ministry by the end of next month, is expected to propose the establishment of a technical group in 2024. This group will work on defining common standards and processes, ensuring a smooth transition to T+1 across the London Stock Exchange, banks, asset managers, and other market participants.
Bim Afolami, Britain’s financial services minister, previously mentioned that the taskforce would “upgrade our back-office operations for the 21st century by moving from a T2 to a T1 settlement.”
Geffen emphasized the need to create a technical group and implement its standards during the first phase in 2025, getting the market “match fit” for T+1 before an actual switch in the second phase, with the specific date yet to be determined.
By aiming for completion of the first phase in 2025, there is ample time to assess and quantify the necessary system changes. However, some industry insiders suggest that the actual transition to T+1 may not occur before 2026.
The European Union has also expressed intentions to move to T+1, emphasizing the need for coordination with Britain and Switzerland. Geffen stressed the importance of not setting a fixed date for T+1 in Britain at this stage, emphasizing the need for mandated coordination and learning lessons from the U.S. move.
