The European Union will transition to T+1 settlement for securities transactions on 11 October 2027. This means that, as a rule, there will be only one business day between the execution and settlement of a transaction. According to the European Securities and Markets Authority (ESMA), the regulatory framework is now in place; the focus is therefore shifting to technical and organisational implementation across the entire trading and settlement chain.
Legal framework for the transition to T+1
The legal basis for the shortened settlement cycle is Regulation (EU) 2025/2075 of the European Parliament and of the Council of 8 October 2025. It amends Regulation (EU) No 909/2014 on central securities depositories and was published in the Official Journal of the European Union on 14 October 2025.
The United Kingdom and Switzerland likewise intend to shorten their settlement cycles on 11 October 2027. The simultaneous transition is intended to support the coordinated development of the European capital markets.
Amended settlement discipline requirements
On 6 July 2026, the European Commission adopted the amended regulatory technical standards on settlement discipline as C(2026) 4640 final. The legal act amends Delegated Regulation (EU) 2018/1229. Article 2 contains provisions on its entry into force and staggered dates of application.
The legal authority is derived from the Central Securities Depositories Regulation (CSDR) as amended by Regulation (EU) 2023/2845. This regulation, known as the CSDR Refit, entered into force on 16 January 2024 and amended, among other provisions, Article 6(5) and Article 7(10) CSDR.
According to ESMA’s communication of 16 October 2026, the regulatory framework is complete with the regulatory technical standards and the revised guidelines on standardised procedures and messaging protocols. The guidelines specify how market participants are to comply with the amended allocation and confirmation requirements.
Initial requirements apply from December 2026
The first relevant deadline falls before the actual transition to T+1. According to ESMA, investment firms and their clients must comply with the new allocation and confirmation requirements from 7 December 2026.
The amendments concern, in particular, Articles 2 and 3 of Delegated Regulation (EU) 2018/1229. They cover obligations concerning allocation, confirmation and settlement information in relation to professional and retail clients. The applicable deadlines will be brought forward to the trade date.
Standardised and machine-readable communication
From 7 December 2026, the revised ESMA guidelines provide in particular for the following forms of communication:
- electronic and standardised communication channels,
- international standards for the exchange of messages,
- machine-readable communication procedures.
Under the guidelines, an exception to machine-readable communication applies in the event of temporary technical disruptions. This limitation does not affect the other requirements for standardised processes.
ESMA considers market participants to be in the implementation phase
ESMA Chair Verena Ross described the transition to T+1 as one of the most impactful recent initiatives concerning the structure of the financial markets. In her assessment, it is intended to fundamentally improve the efficiency and international competitiveness of markets in the European Union.
She stated, in substance, that the date is fixed, the roadmap is clear and, with the final regulatory guidance published on 16 October 2026, the framework is in place for all participants in the trading and settlement chain. According to ESMA, a successful transition requires a joint effort by market participants and public authorities.
Review of the entire trading and settlement chain
ESMA calls on market participants to complete their technical work, assess the status of the transition across their respective ecosystems and begin testing as early as possible. These reviews should not be limited to individual internal systems but should encompass the entire chain from trading through to settlement.
In this context, ESMA refers to the recommendations of the EU T+1 Industry Committee. Its roadmap was published in June 2025. An initial readiness survey took place from 21 November to 19 December 2025, followed by a second survey on 12 May 2026. ESMA and the national supervisory authorities also collected their own data.
According to Thorsten Pötzsch, Chief Executive Director of the Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin, German Federal Financial Supervisory Authority), nearly two years before the transition, 77 per cent of the companies surveyed were addressing the recommendations of the High-Level Roadmap or had already initiated corresponding measures. This figure reflects the status at the time of the survey and does not indicate that the market was fully prepared for implementation.
Technical functions at settlement level
The shortening of the settlement cycle does not solely affect scheduling following the execution of a transaction. According to an ESMA statement of 20 July 2026, the settlement level must also be further optimised by 11 October 2027.
In particular, ESMA identifies the market-wide use of certain central securities depository functions:
- automated partial settlement,
- hold-and-release mechanisms,
- automatic collateralisation.
These functions are intended to support settlement processes within the shortened time frame. Their integration also affects the interfaces between market participants, market infrastructures and technical service providers.
Risks of inadequate preparation
ESMA points out that inadequate preparation may give rise to significant operational and reputational risks. These include dependencies on market infrastructures and IT service providers. Remedial work required at short notice may also result in higher expenditure on information technology and training.
The transition process therefore encompasses regulatory requirements as well as technical and organisational dependencies. The staggered deadlines remain decisive: first, 7 December 2026 for the new allocation and confirmation requirements, followed by 11 October 2027 for the transition to the T+1 settlement cycle.
Capital markets law implications of the transition
The new timing requirements may affect various contractual relationships, internal processes and obligations under capital markets law. Companies, investors and other market participants with questions regarding the classification of the T+1 rules and their individual legal implications can find further information from MTR Legal on legal advice in capital markets law.
