T+2: The Catalyst for Change

The scale of the 6th October 2014 move to T+2 settlement is unprecedented. There is no single co-ordinating body, and markets and their supporting infrastructures have changed significantly since settlement cycles were reduced to T+3. Transaction numbers are much higher and operational processing models have become increasingly aligned functionally. Exception-based processing is the norm, with extensive use of offshoring and outsourcing and a significant reduction in front-to-back business knowledge.

The reduction in standard settlement cycles from T+3 to T+2 will be the catalyst that drives the industry to achieve same day and near real-time trade agreement and settlement instruction. The costs and risks of continuing with current industry operating models will be too high.

This change to T+2 will impact the whole market. The European Commission’s Central Securities Depositories Regulation (CSDR) is only for on-exchange trades but the market convention will be that this becomes the default for OTC trades. Transactions with clients or counterparties outside Europe will also be settled on T+2.

Processing and Controls

Previous reductions in the settlement cycle have allowed two days (T0 and T+1) for trade processing and instruction, with at least one more day for exception processing. This has meant that:

  • Trade agreement and settlement instruction can currently be completed on T+1
  • Settlement details don’t have to be agreed prior to instruction, as there is time to use
  • the settlement exception process to identify and resolve differences


This will no longer be the case with T+2 settlement. There will be significant challenges in…


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