European securities settlement is facing a profound change. From 11 October 2027, the shortened T+1 settlement cycle will apply to transactions. For banks and securities institutions, this means adapting all processes, systems and organisational structures to ensure timely and efficient settlement at all times.
In our article “The countdown to T+1 in Europe is on” back in May, we highlighted the upcoming challenges and set out an initial strategic framework. In this new series of articles, we now take a practical approach to implementation and highlight the five critical points of a T+1 project: scoping, dependencies, implementation, legacy IT and testing.
Scoping as the foundation
It all starts with scoping, which to a certain extent forms the foundation of the entire project. Without a reliable analysis, neither the need for adaptation nor the necessary costs – especially for the year 2026 – can be realistically estimated. Scoping means recording and evaluating all the necessary changes along the value chain. It is not enough to just look at individual systems or processes. It is crucial that trading, clearing and settlement processes are analysed in their entirety and that interfaces to adjacent areas such as capital measures, reporting or liquidity management are also taken into account.
A practical approach is to first model the so-called plain vanilla processes – i.e. the standard processes from order management to settlement. These are checked against the T+1 requirements in order to identify bottlenecks and necessary adjustments at an early stage. This is followed by the analysis of special cases and variants, such as cross-border transactions or complex corporate actions. It is here in particular that additional effort is often required, which is crucial for budgeting.
Framework concept and methodology
As many regulatory details will only be finalised over the coming months, a purely sequential approach is not recommended. Instead, a hybrid approach has proven its worth: On the one hand, a framework concept with clear guidelines for target processes, interfaces, data consistency and architecture decisions is required. On the other hand, it is necessary to design the modelling and implementation in iterative steps that offer flexibility for adjustments. Agile elements such as sprints and backlogs make it possible to react to new requirements without losing sight of the overall picture.
Scoping therefore not only provides a snapshot, but also creates the basis for a resilient and adaptable project model that can be continued until the go-live in 2027.
Challenges in scoping
The complexity is already evident in the scoping phase. Incomplete regulatory requirements make it necessary to work with assumptions that need to be reviewed and hardened over the course of the project. Added to this is the overlap with other major initiatives. Of particular note is the UNO project at Clearstream, which coincides closely with T+1. Both initiatives utilise the same resources and systems, which is why they should be strategically considered together. The Fontus project at WM Datenservice should also be mentioned here.
Another aspect is the standardisation of interfaces. In its assessment on shortening the settlement cycle in November 2024, ESMA already emphasised that T+1 can only be realised with full automation of the post-trade area and on the basis of international messaging standards. This makes ISO 20022 the de facto binding standard for securities settlement – a point that further emphasises the technical dimension of scoping.
Technical bottlenecks also play a role. Systems in the back office or on the mainframe reach their limits when processing windows are shortened. At the same time, the extension of trading hours has a negative impact as it restricts batch processing and further reduces the time windows available for reconciliation and settlement.
Outlook
Scoping is much more than a preparatory step – it is the key to a realistic budget and a robust project plan. If you carry out the analysis systematically, you can reliably estimate the dimensions of T+1 and set the necessary course at an early stage.
In the next article in this series, we will look at the dependencies: What internal and external factors need to be considered and how can overlaps with parallel projects be managed so that risks are minimised and resources are used efficiently?
