When the US and Canadian markets slashed their settlement
window to just one day, the change promised faster trade finality and reduced
counterparty risk.
But for financial firms across Europe and Asia, it has
triggered a logistical scramble, compressing timelines, inflating costs, and
straining cross-border trade operations like never before.
T+1: A Reform Born in Crisis
This is according to research by Vermiculus and GreySpark Partners, which pointed out that the transition set off a chain
reaction for global firms with exposure to American markets.
The idea of moving to T+1 settlement started in 2020
and 2021. Market volatility during the COVID-19 pandemic and the meme stock
mania exposed the fragility of a two-day settlement system. U.S. regulators
pushed for a faster cycle to limit risk.
While North America, Argentina, and India now operate
on a T+1 basis, most of the world—including the EU, UK, Singapore, and Hong
Kong—still adheres to a T+2 cycle. This divergence means that firms operating
across borders must now reconcile vastly different trade deadlines.
Read more: IG Wants to Save UK Capital Markets, but Is London Doomed to Fail?
Allocating and affirming trades by 21:00 ET on the trade
date is now mandatory. That creates a serious overlap problem for firms in
Europe and Asia, where business hours end before U.S. markets close. European firms now have just three working hours to
process trades, compared to ten under the previous regime.
Europe’s Compressed Clock
For UK and EU firms trading in U.S. markets, the time
available to finalize trades has been cut nearly in half. This shift forces
firms to either stretch working hours into the night or reconfigure operations
to include global teams. Smaller firms without international coverage face
higher risks of settlement failure—and heavier costs to avoid it.
In Asia, time zones prove even more unforgiving.
Japanese firms, for instance, must now process U.S. trades after local business
hours. The working-hour overlap is nonexistent. Without night shifts or
relocated operations, these firms risk missing settlement deadlines altogether.
The FX dimension adds to the stress. Many APAC
institutions are being forced to pre-fund trades or outsource foreign exchange
processes due to tight timeframes and unfavorable conversion rates.
More about T+1 Settlement transition: Canada Shifts to T+1 Settlement Cycle, US to Follow Tomorrow
Nasdaq and the Intercontinental Exchange are betting
on even longer trading hours. Nasdaq plans to roll out a 24/5 schedule by late
2026, targeting global investors used to the always-on crypto markets.
Toward Real-Time Trading?
Digital asset markets offer real-time settlement and
24/7 trading—features that traditional markets are slowly inching toward. The
U.S. T+1 rule may be a step in that direction.
The EU and UK plan to shift to T+1 by October 2027.
However, their fragmented market structures mean their transition may prove even more complex. In the meantime, global firms must consider whether to build costly night operations or embrace automation to survive the faster pace set by North America.
When the US and Canadian markets slashed their settlement
window to just one day, the change promised faster trade finality and reduced
counterparty risk.
But for financial firms across Europe and Asia, it has
triggered a logistical scramble, compressing timelines, inflating costs, and
straining cross-border trade operations like never before.
T+1: A Reform Born in Crisis
This is according to research by Vermiculus and GreySpark Partners, which pointed out that the transition set off a chain
reaction for global firms with exposure to American markets.
The idea of moving to T+1 settlement started in 2020
and 2021. Market volatility during the COVID-19 pandemic and the meme stock
mania exposed the fragility of a two-day settlement system. U.S. regulators
pushed for a faster cycle to limit risk.
While North America, Argentina, and India now operate
on a T+1 basis, most of the world—including the EU, UK, Singapore, and Hong
Kong—still adheres to a T+2 cycle. This divergence means that firms operating
across borders must now reconcile vastly different trade deadlines.
Read more: IG Wants to Save UK Capital Markets, but Is London Doomed to Fail?
Allocating and affirming trades by 21:00 ET on the trade
date is now mandatory. That creates a serious overlap problem for firms in
Europe and Asia, where business hours end before U.S. markets close. European firms now have just three working hours to
process trades, compared to ten under the previous regime.
Europe’s Compressed Clock
For UK and EU firms trading in U.S. markets, the time
available to finalize trades has been cut nearly in half. This shift forces
firms to either stretch working hours into the night or reconfigure operations
to include global teams. Smaller firms without international coverage face
higher risks of settlement failure—and heavier costs to avoid it.
In Asia, time zones prove even more unforgiving.
Japanese firms, for instance, must now process U.S. trades after local business
hours. The working-hour overlap is nonexistent. Without night shifts or
relocated operations, these firms risk missing settlement deadlines altogether.
The FX dimension adds to the stress. Many APAC
institutions are being forced to pre-fund trades or outsource foreign exchange
processes due to tight timeframes and unfavorable conversion rates.
More about T+1 Settlement transition: Canada Shifts to T+1 Settlement Cycle, US to Follow Tomorrow
Nasdaq and the Intercontinental Exchange are betting
on even longer trading hours. Nasdaq plans to roll out a 24/5 schedule by late
2026, targeting global investors used to the always-on crypto markets.
Toward Real-Time Trading?
Digital asset markets offer real-time settlement and
24/7 trading—features that traditional markets are slowly inching toward. The
U.S. T+1 rule may be a step in that direction.
The EU and UK plan to shift to T+1 by October 2027.
However, their fragmented market structures mean their transition may prove even more complex. In the meantime, global firms must consider whether to build costly night operations or embrace automation to survive the faster pace set by North America.
This post is originally published on FINANCEMAGNATES.
