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The quote from Deutsche Bank’s Neville in the “flow” article highlights a critical challenge for Europe as it prepares for a move to T+1 settlement: market fragmentation.
Here’s a breakdown of the key issues mentioned and why they pose a challenge for a unified T+1 implementation in Europe:
* 24 CSDs connected to TARGET2-Securities (T2S) and others not yet connected: While T2S aims to harmonize securities settlement in Europe, the existence of multiple CSDs, even those on T2S, means different underlying operational processes and legal frameworks at a national level. CSDs not yet connected to T2S add another layer of complexity.
* Distinct settlement infrastructures: Each EU jurisdiction can have its own specific systems and procedures for settling securities, even if they ultimately interact with T2S. This makes a “one-size-fits-all” approach to T+1 difficult.
* Local market cut-off times: Different countries have varying deadlines for trade confirmation, allocation, and other post-trade processes. Shortening the settlement cycle to T+1 will put immense pressure on these cut-off times, requiring significant adjustments and potentially creating a “time crunch” for cross-border trades.
* Regulatory nuances: Despite being part of the EU, each jurisdiction maintains its own regulatory interpretations and specific rules. These nuances can impact how T+1 is implemented and what changes are required for market participants in each country.
Why this fragmentation matters for T+1:
The move to T+1 requires a significant acceleration of post-trade processes. In a fragmented environment, this means:
* Increased operational complexity: Firms operating across multiple European jurisdictions will need to adapt to different rules, systems, and timelines for each market.
* Higher risk of settlement fails: Any delays or mismatches across different national infrastructures can lead to failed trades, which incur penalties and increase counterparty risk.
* Challenges for cross-border transactions: The discrepancies in cut-off times and processes will be particularly challenging for trades involving parties in different European countries or with non-European markets that have already moved to T+1 (like the US, Canada, and Mexico).
* Need for extensive coordination: A successful T+1 implementation in Europe will require unprecedented collaboration between regulators, CSDs, market participants, and technology providers across all jurisdictions to harmonize processes and address potential bottlenecks.
The European Commission has proposed an 11 October 2027 target date for the EU-wide move to T+1, with the aim of promoting settlement efficiency, increasing market resilience, and avoiding fragmentation with other major global markets. This highlights the recognition of the issues Neville raises and the effort being made to coordinate the transition.

Video courtesy of Eurex

Video courtesy of Eurex