On Wednesday 12 February, the European Commission published a legislative proposal to introduce a targeted amendment to the Central Securities Depository Regulation (CSDR) to shorten the settlement cycle in the EU from two days (“T+2”) to one (“T+1”) for transactions in transferable securities – such as shares or bonds – executed on trading venues.

The CSDR refit, adopted in December 2023, mandated the European Securities and Markets Authority (ESMA) to prepare a report assessing the appropriateness of shortening the settlement cycle in the EU. ESMA published its report on 18 November 2024, recommending that the EU move to T+1 no later than 11 October 2027.

The European Commission proposes 11 October 2027 as the appropriate date for the move to T+1 settlement, taking into account ESMA's recommendations and input from stakeholders. This timeline will give market participants approximatively 1 year to develop and agree on standards and processes, 1 year for implementation and 1 year for testing to ensure an orderly and successful transition to T+1 in EU capital markets. While settling securities transactions on T+1 is already technically and legally possible in the EU, a legislative proposal would help coordinate the process and provide legal and planning certainty. The proposal sets a maximum duration for the settlement cycle (T+1) while also allowing market participants to settle their transactions faster, at T+0, if they wish.

The proposal has been submitted to the European Parliament and the Council of the EU for agreement. The changes will enter into force once an agreement is reached and the proposal is published in the Official Journal of the EU.

If you have any questions on the EU's transition to T+1 settlement, please email Aniqah Rao.