Sasha Mills, BoE Executive Director of Financial Market Infrastructure, and Mark Francis, FCA interim director of wholesale markets sell-side, have delivered speeches on the implementation of T+1 settlement at a UK Accelerated Settlement Taskforce (AST) industry event.
Mills highlighted the several benefits that the UK’s move to T+1 will bring to UK financial markets, including:
- A shorter settlement cycle will mean that firms and central counterparties (CCPs) face lower counterparty risks, which the BoE anticipates will lead to significant amounts of margin being released by CCPs to members and their clients. The BoE estimates that this margin could be up to £1bn;
- Reductions in the costs and risks associated with the existing misalignment of settlement cycles, such as between the UK and US, which has already transitioned to T+1 settlement; and
- Catalysing firms’ investment in automation and standardisation, leading to lower settlement costs in the medium term, and more efficient markets.
She also noted two key challenges of the T+1 transition: adjusting to multiple time zones, and standardising and automating settlement instructions. Mills noted the importance of firms and settlement infrastructures implementing plans for sustainable changes, while maintaining resilience settlement processes. In this regard, the BoE anticipates continued dialogue with regulators in other markets who are pursuing similar changes.
In his speech, Francis also welcomed the recommendations of AST’s final report, noting that the change will bring market efficiency, liquidity improvements, and support the growth and competitiveness of the UK financial services industry. He encouraged firms to engage with the recommendations and begin to prepare for the transition.
He also highlighted the FCA’s ‘one-stop-shop’ webpage for industry on T+1.