In February 2025 it was announced that the European Union (EU) will switch to single-day settlement (known as T+1) of stock and bond trades by 2027. Settlement is the act of transferring securities and funds between buyers and sellers after a trade is executed.
The shorter the settlement cycle, the faster investors have access.
This is just one reason stock markets around the world are trending toward same-day settlement, or ‘T+0’. As might be expected, some are moving faster than others. India’s
$5 trillion stock market, for example, had moved to two-day settlement (T+2) by 2003 – 14 years before the United States. In January 2023, India became the second country, after China, to adopt T+1. As the United Kingdom and the EU play catch-up, India
has almost finished rolling out T+0.
So what are the benefits of T+0, and how can it be leveraged?
Leveraging T+0: Four ways institutions can benefit
To install T+0, large-scale updates to regulation, infrastructures, and processes are required. This includes building out real-time, tested payment systems; online depositories; and cutting-edge technology stacks. All of this comes with a considerable price
tag – though it does afford considerable functionality.
Here are four ways banks can leverage T+0 settlement:
1. Digitisation
Near-instantaneous settlement will engender greater levels of digitisation of infrastructures – a much-needed lift given today’s proliferation of legacy banking technology. This has impacts across the trade lifecycle, from execution to settlement – enabling
real-time verification, confirmation, and payment processing.
2. Enhanced liquidity management
Intra-day settlement helps investors liquidate stocks instantly – boosting cash availability in the markets. Indeed, by enabling stakeholders to quickly access funds, capital is freed up for other investment opportunities. For banks, greater control over
liquidity means more power to meet regulatory frameworks – such as the third Capital Requirements Regulation (CRR III) – or respond to macro-economic shocks and shifting trade policies, by moving cash across borders and leveraging multi-currency settlement
solutions.
3. Reduced counterparty risk
With T+0, the time during which a bank is exposed to default risk is greatly limited – promoting high levels of financial stability. Banks may use this as an opportunity to re-allocate resources to more revenue-driving activities.
4. Enhanced market efficiency
Overall, faster settlement times can be leveraged to promote more responsive market conditions and improved trading dynamics.
Of course, stakeholders must expect challenges on the road to T+0. Implementation demands robust technology infrastructure, to support real-time processing and verification. Banks will also need to adapt their internal processes and risk management frameworks
to accommodate the demands of near-instant settlement.
Logistically, T+0 delivery necessitates high levels of coordination between a number of players in the ecosystem. Institutions and brokers, for example, will have to communicate to regulators precisely how T+0 could impact their business models – and advise
on how progress should be made in a measured, manageable, and effective manner.
A roadmap for rapid settlement
To ensure stability, and a level playing field, T+0 implementation must be approached in a phased manner – with the full backing and support of regulators. In India – an exemplar of short-cycle settlement – the Securities and Exchange Board of India (SEBI)
began with T+0 for just 25 scrips, a limited number of brokers, and a window between 9:15 am to 1:30 pm. In January 2025, with all going to plan, SEBI added another 500 stocks to the T+0 test.
The real-time case study from India should be monitored by regulators and institutions in the Western Hemisphere, to inform its approach and expedite the delivery of same-day, instantaneous settlement – unlocking nimble, dynamic stock markets and a raft
of new business opportunities.