Transition to T+1

Introduction

On October 11, 2027, the United Kingdom (UK), the European Union (EU) and Switzerland plan to accelerate their settlement cycles from Trade Date + 2 (T+2) to Trade Date + 1 (T+1). RBC Investor Services created the following FAQ to support market participants understanding of the change. We will update the content periodically as preparations and understanding of the change develop and based on common questions we see from our clients.

Background

Why is Europe transitioning to T+1?

With the United States, Canada and Mexico already operating on T+1 cycles since May 2024, the UK, the EU and Switzerland view the shortening of the settlement cycle as essential to maintaining the competitiveness of their capital markets:

How is the change being governed?

The change is being spearheaded by the Accelerated Settlement Taskforce (AST) in the UK, the European Securities and Markets Authority in the EU and the Swiss Post-Trade Council (SwissSPTC). Each have published comprehensive roadmaps and maintain close co-ordination to minimize regional divergences.

When will Europe's transition from T+2 to T+1 settlement come into effect?

Europe will adopt a Big Bang implementation across all applicable markets. The first day of securities trading where T+1 settlement will be applicable is scheduled for October 11, 2027:

How does the Europe transition differ from North America?

Europe's transition to T+1 is inherently more complex than North America due to the greater number of currencies, market infrastructures and regulatory bodies involved. European settlement operates primarily through central securities depository (CSD) level matching, where settlement requires the successful matching of settlement instructions from both counterparties. This differs from the US and Canada, where central clearing and upstream trade affirmation are embedded in the post-trade process.

Are other markets intending to move to T+1 in the future?

Several major markets in APAC are actively considering converging on a T+1 settlement cycle, including Australia, Singapore and Japan. Markets including Chile, Colombia, Peru and Brazil are expected to transition to T+1 in 2027–2028. Where possible, firms should consider the acceleration of settlement cycles in additional markets within their planning.

RBC Investor Services T+1 Program

What is RBC Investor Services' status of the transition to T+1 settlement?

We began preparations for T+1 readiness in Europe in 2025 and are confident in being fully ready for the go live. In 2026, we are implementing core system enhancements and performing in-depth reviews of our operating model. Through our onsite presence in London, we actively participate in several associations and industry discussions to ensure a smooth transition.

Securities and Transaction Scope

What securities and transaction types are in-scope?

Transactions in transferable securities which are executed on UK/EU/Swiss trading venues and settle in the local CSD will be in-scope for T+1:

Are new issue distribution instructions also part of the T+1 scope?

The obligation to move to a T+1 cycle is not applicable to new issue distribution instructions.

Are over-the-counter (OTC) transactions also part of the T+1 scope?

OTC trades are not obligated to move to a T+1 cycle; however, it is expected that the market practice will adapt and they will shift to T+1.

Are securities financing transactions (SFTs) also part of the T+1 scope?

SFTs, including securities lending transactions and repos, are not obligated to move to a T+1 cycle; however, it is expected that the market practice will adapt and, in most cases, will shift to a T+1 or even T+0 (same-day) basis.

Are derivatives also part of the T+1 scope?

Securitized derivatives, including warrants, certificates and structured products, are classified as transferable securities that can settle at the CSD and should fall within T+1. The underlying asset of the securitized derivative is irrelevant.

OTC and exchange-traded-derivatives (ETDs) are classified as derivatives rather than transferable securities and are therefore not in-scope. Physical settlement of underlying instruments associated with derivative exercise/expiry is expected to remain outside of the regulatory scope.

Will penalties apply to in-scope transactions which fail to settle on T+1?

Mandatory cash penalties are levied in the EU for settlement fails and there are no plans to change this as part of the T+1. A temporary suspension to the cash penalty regime has been raised to the European Commission; however, a formal decision will be taken closer to go live.

Independent of the T+1 initiative, an amendment to the cash penalty regime has been suggested which, if enacted, will increase penalties for most transaction types. An update will be provided once a decision has been made on this.

Daily Operating Timetable

To ensure sufficient time for each post-trade actor to complete their activities, each jurisdiction has provided an operational timetable to define when key activities are required to be completed by to ensure timely settlement.

What are the timing requirements for allocations and confirmations?

Will settlement instructions be rejected if received after the specified timings?

The CSD will not reject any settlement instructions received after the deadline. However, it is strongly recommended that instructions are submitted at the earliest possible opportunity to increase the chances of on time settlement and avoiding settlement penalties.

Will there be target matching or settlement thresholds?

Unlike the United States, which aligned on an industry target to affirm 90% of trades by 21:00 EST on Trade Date, there is no formal settlement efficiency metrics required to be met in the UK, EU or Switzerland. Instead, settlement efficiency will be monitored and disclosed through aggregated, market-level metrics published by market infrastructures and regulators (e.g. CSDs, T2S and supervisory authorities).

How is securities lending impacted?

RBC Investor Services does not expect material change to its securities lending operating model or client service. In the vast majority of cases, the team can perform substitutions and recalls are performed same day when substitution is not available.

To support an efficient process, securities lending clients are required to send notification of sale to the agent lender as soon as possible on Trade Date, ideally concurrently to sending orders to the executing broker. Similarly, recalls should be initiated in advance for upcoming proxy votes to ensure the timely return of securities for voting.

Settlement Framework Market Mechanics

Are there any changes to the format of settlement instruction formats?

There are currently no expected changes to settlement instruction formats and existing ISO 15022 and ISO 20022 implementations remain valid. Firms instructing through SWIFT should ensure that they are populated per SWIFT standards to enable automatic processing.

How should I use the Place of Settlement (PSET) and Place of Safekeeping (PSAF) in my settlement instruction?

The EU T+1 Industry Committee Taskforce on SSIs recommends the Securities Market Practice Group (SMPG) established market practice to ensure proper settlement flow and avoid mismatches:

• The PSET field should be populated with the BIC11 of the CSD where the counterparty is located.
• The PSAF field should be included in settlement instructions only when securities are held in multiple locations (e.g. across different custodians, CSDs, or ICSDs). For settlement instructions sent to ICSDs, PSAF should not be used unless the security is multi-deposited, in which case the client should specify a preferred location.

Users of DTCC CTM should note that, from September 2026, PSET will become a mandatory field.

Are partial settlement practices changing?

Unless both parties explicitly opt out in their instruction, partial settlement is expected to become the default settlement option at the CSD.

A small number of transaction types will be subject to unilateral opt out, where one party can explicitly opt out to disable partial settlement:

It is important that firms and counterparties instruct using the appropriate transaction types so that the appropriate partial treatment is applied.

Client Preparation and Actions

If not already in place, industry participants should establish a formal T+1 transition program with senior stakeholder sponsorship and a clear internal governance framework, with dedicated workstreams to assess the business, operational and technology impacts across relevant functions.

How can investment managers prepare for the transition to T+1 settlement in Europe?

Investment managers should adapt to the compressed timelines by enhancing internal operating models and where possible enhancing automation. The impact to investment managers based in North America and APAC will be exacerbated since time zone differences will reduce operational window to complete post-trade activities.

At a high-level, to prepare for the transition to T+1 settlement, investment managers should consider the following aspects of their operations:

What is required to be implemented by investment managers in 2026?

Although Europe will not transition to T+1 until October 2027, it is expected that firms will use 2026 to implement the changes required to operate in a T+1 framework.

For investment managers, there are explicit requirements for allocations and confirmations to be exchanged using a standardized electronic format and processed on Trade Date (23:00 CET in the EU and 23:59 GMT in the UK) by the end of 2026.

Contact Us

If you have any questions, please reach out to us: t1askmeanything@rbc.com or contact your client representative.

Further Reading

If you would like to read more about the European T+1 transition, we encourage you to visit the following websites:

Regulatory and industry coordination

• Accelerated Settlement Taskforce: Accelerated Settlement UK
• European Securities and Markets Authority: Shortening the settlement cycle to T+1 in the EU
• Swiss Securities Post Trade Council: T+1 in Switzerland and Liechtenstein

Industry groups

• Association for Financial Markets in Europe
• International Securities Lending Association
• Securities Market Practice Group
• The Investment Association