T+1 in practice: What the industry has learned

When the U.S. officially transitioned to T+1 settlement last May, the headlines painted it as a sweeping modernisation effort — faster, leaner, and more liquid markets. In many ways, that was accurate. Broker-to-broker transactions became more efficient, capital was freed up, and the theoretical reduction in settlement risk became a tangible operational improvement.

But as with any systemic shift, the real story begins after implementation.

Now, well into this new era, we’re starting to see where the transition delivered on its promises. Unintended consequences have quietly emerged, however, particularly for asset managers, custodians, and smaller firms navigating cross-border complexities.

Two different worlds: Broker vs. Investment manager workflows

From the outset, much of the focus around T+1 was on clearing and settlement between brokers, the highly automated, exchange-based transactions that were ripe for acceleration. But less attention was paid to the broader and more fragmented ecosystem where asset managers execute, allocate, and fund trades across global markets. These workflows, especially those involving FX conversions, securities lending, and corporate actions, don’t move at the speed of automation. They are layered with operational nuance and often rely on multiple intermediaries.

The U.S. move to T+1 compressed an already tight timeline, particularly for cross-border participants. For example, an Australian investment manager now effectively operates on a T+0 basis when executing trades in U.S. markets due to the time zone difference. Pre-funding requirements for FX, particularly where CLS participation is not an option, have become a significant operational burden, one that disproportionately affects small and mid-sized firms without the infrastructure or capital flexibility of large institutions.

Automation alone isn’t the answer

While automation has been held up as the panacea for a compressed settlement cycle, it’s important to acknowledge its limits. Many firms, especially those outside the largest global asset managers, still rely on semi-manual processes. “Straight-through processing” is often more aspirational than real. For some firms, automated settlement still means pushing a button that sends a secure fax or PDF.

This isn’t due to a lack of willingness to modernise, but rather the sheer cost and complexity of doing so. Smaller investment managers juggling multiple custodians now face the added operational burden of managing multiple proprietary portals and workflows, a patchwork that further fragments the post-trade environment.

Custodian banks, to their credit, stepped up during the transition. Many created tools, portals, and processes to assist clients in adapting. But with each custodian offering a different interface, true interoperability remains elusive.

Lessons for the UK and EU

As regulators and market participants in the UK and Europe gear up for their own T+1 transitions, the U.S. experience offers several critical lessons:

1. Separate the workflows. Broker-to-broker transactions should not be conflated with investment manager-to-broker flows. They operate differently, rely on different infrastructure, and require different levels of preparation.
2. Address funding and FX head-on. Cross-border trade flows require early visibility into funding needs. Pre-funding models, if required, must be operationally and economically viable, particularly for firms not large enough to be CLS participants.
3. Engage early and often. One of the most successful elements of the U.S. transition was the industry-wide education effort. The International Securities Association for Institutional Trace Communication (ISITC), in coordination with other organisations and regulators, held roadshows, produced guidance, and participated in working groups to elevate awareness. Even so, surveys revealed that, just months before go-live, some U.S.-based firms still believed they wouldn’t be impacted by T+1. Early and inclusive communication across the ecosystem is critical.
4. Don’t ignore the operational exceptions. From securities lending recalls to failed allocations and last-minute FX mismatches, exception handling still requires people. Even the most advanced automation and AI can’t resolve every trade anomaly. As we compress settlement windows, we must also ensure the people and processes needed to resolve breaks are not overlooked or under-resourced.

Looking ahead: The path to T+0?

The move to T+1 inevitably raises the question: is T+0 next?

In theory, some elements of T+0 are already happening, particularly in exchange-traded instruments among brokers with integrated systems. But for the broader ecosystem, especially when factoring in global time zones and human-dependent exception resolution, T+0 remains a distant consideration.

Yes, distributed ledger technologies and enhanced automation may eventually bring us closer. But we must remain realistic. Settlement doesn’t just happen in code, it happens in operations teams, in funding departments, and in the real-world constraints of global financial plumbing. The more compressed the timeline, the less time there is to fix even a small error, and the more fragile the system becomes.

Final thoughts

The U.S. transition to T+1 has largely achieved what it set out to do. Settlement is faster, risk windows are shorter, and capital that was once tied up in margin requirements is now more readily available. For highly automated broker-to-broker transactions, the benefits have been clear.

At the same time, the shift exposed how uneven the post-trade landscape remains. Many asset managers, custodians, and smaller firms continue to grapple with funding constraints, time zone mismatches, and operational workflows that are not easily compressed. These are not edge cases—they represent a significant portion of the market.

As other regions move toward T+1, the U.S. experience offers important lessons. The goal should not be faster settlement for its own sake, but a more resilient and inclusive infrastructure that accounts for the real-world complexity of global trading. That means understanding where automation works well, where human intervention is still essential, and where market participants need more support to keep pace.

Ultimately, the success of T+1 will be measured not just by what it streamlined, but by how well it laid the groundwork for a stronger, more coordinated global settlement ecosystem.