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In the event of this happening, the AMF and Banque de France have suggested that rules should be carefully designed to ensure the continued attractiveness of European instruments to foreign investors. Its final report will be published at the end of this year.
Given that the settlement cycle is now shorter in the US trading volumes on a Thursday have dropped off significantly thanks to funding requirements that require brokers to fund a position for an additional three days on Friday, Saturday and Sunday given the slightly longer settlement cycle in Europe, the UK, and most of Asia Pacific.
The current timeline for the UK appears to include a plan being put in place in 2025 with the implementation of a T+1 settlement cycle in UK occurring no later than 31 December 2027. This, however, is still up for debate and subject to change.
In the current state with T+2 you have 48 hours to execute a security trade, match that trade with brokers, execute the FX and get everything settled. In addition, there are various trade types to account for, such as corporate actions or investor flows, that are different from the traditional security RVP/DVP FX transaction.
The UK has outlined a roadmap targeting Q4 2027, but despite ample time to prepare, significant actions are likely to commence soon. Institutional investors and brokers may adjust more easily, but smaller firms could face difficulties, necessitating investment in new infrastructure or reliance on third-party service providers.
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