EU Establishes Governance Structure for T+1 Transition

The European Securities and Markets Authority (ESMA), the EU’s financial markets regulator and supervisor, the European Commission (EC) and the European Central bank (ECB) have unveiled a new governance structure to support the transition to the T+1 settlement cycle in the European Union.

ESMA recently issued a report into T+1 transition and recommends 11 October 2027 as the optimal date for the change, although it would be implemented in phases, with key milestones including technology upgrades, stakeholder engagement and regulatory alignment.

The bodies say the new structure has been designed to oversee and manage the operational, regulatory and technological aspects of the transition, and that given the high level of interconnectedness within the EU capital market, a coordinated approach across the EU, involving authorities, market participants, financial market infrastructures and investors, is desirable.

The new governance model includes an industry committee, composed of senior leaders and representatives from market players. This will be chaired by Giovanni Sabatini, it was announced late last year, Sabatini has served as a member of the European Economic and Social Committee and held roles within IOSCO, EBF and ECSDA.

Under the industry committee there will be several technical workstreams, focusing on the technological operational adaptations needed in the areas concerned by the transition to T+1 (i.e. trading, matching, clearing, settlement, securities financing, funding and FX, asset management, corporate events, settlement efficiency). In addition, two more general workstreams will review the scope and the legal and regulatory aspects of these adaptations.

Finally, a coordination committee, chaired by ESMA and with representation from the EC, the ECB, ESMA and the chair of the industry committee will ensure coordination between the authorities and the industry, advising on challenges that may arise during the transition.

“Shortening the trade settlement cycle from the current T+2 framework to one business day should enable faster execution, clearing, and settlement of securities transactions, as well as international alignment, benefiting the entire EU financial ecosystem,” says ESMA.