While formal policy decisions will only materialize over the course of this year, it is already clear that the strong likelihood is that the UK and EEA will transition to a T+1 settlement cycle for securities in October 2027. This will be preceded in the UK by a code of conduct setting out intermediate enabling goals for the market, requiring progress by market participants on automation and enhancement of trade processing. 

Although the precise compliance framework for the code is yet to be determined, this has been discussed extensively with authorities (in the UK, this includes the BoE and Treasury), and regulators will offer tangible support while monitoring firms’ progress, likely beginning in 2025 – equivalent scrutiny of Libor transition, with regular questioning on progress and requests for data, is the best precedent. 

In parallel, there continues to be discussion regarding a longer-term trajectory towards more radical change. This encompasses continued work to enable innovations around digital securities and DLT, discussions (if still very early stage) about a path to T+0 settlement, and other innovations – for example, recent SEC approval of 24X initiative to offer round the clock trading – which will place a strain on legacy architectures and operating models.

These developments drive a need for both near and long-term investment in securities’ market platforms and infrastructure during what is a period of rapid – if not disruptive – broader technology innovation and change. Who knows now how the capabilities of GenAI will have evolved by October 2027?

A key success factor for market participants in the coming years will be sequencing and managing this investment in a fashion that accrues benefits in months rather than years, while also preserving optionality around the ultimate target state and avoiding over-commitment. It is essential to make progress, but missteps could be costly, and more immediate day-to-day pressures will not go away.

Given this, how should firms invest and develop their settlement modernization plans, while continuing to drive improvement in current processes? Some ‘no regrets’ options for technological improvements in the near term include:

Understand root causes of settlement issues to support interventions and client engagement

• Leverage process mining tools to turn data into end-to-end process insight and identify root causes of failure, carry out scenario testing to plan and target investments and to track their impact.       
  
• Enhance client analytics, develop data solutions to show how client behaviours impact settlement processes and identify where to focus to address the drivers of poor performance, positively impacting settlement metrics, cost, and client experience.
  

Optimize client channels and interactions

• Reduce use of email to a minimum and, where it remains necessary, invest in client interaction management and handling tools to reduce issues associated with email-based processing.
  
• Employ AI powered workflow and case management to increase efficiency, optimize overall client journey, and better understand interactions and related sentiment, while progressing T+1 objectives.
  

Lay groundwork for strategic modernization of infrastructure

• Harness new tools and approaches to accelerate, derisk, and reduce cost of changes to legacy technology systems, which may be poorly documented or hard to change for example by creating documentation, and interpreting or refactoring code. 
  
• Utilize this necessary activity as an enabling step for a more comprehensive modernization of legacy infrastructure to position for the future, and to support planned cloud migration.
  

By investing in these areas, benefits can be obtained ahead of major changes to core settlement platforms (e.g. re-engineering batch processes), with nearer-term impact resulting in rapid benefits – for example around CSDR performance – and without prejudging the longer-term direction of the market.

In 2025, firms should be pursuing these levers as part of their T+1 initiative, and in parallel with planning and mobilizing large-scale market and client engagement, systems re-engineering initiatives, and putting in place their partner and infrastructure ecosystems.

Capco has industry leading experience in supporting our clients through large scale market transitions like T+1 – deep expertise in front to back securities processes, the technical know-how, tools and approaches to drive change, and hands on experience in working with top tier institutions on US transition and enabling them to capture benefits, not additional costs  Please reach out if you would like to find out more, or see examples and demonstrations of our work and assets such as settlement prediction failure tooling, client interaction optimization, legacy system modernization accelerators, and more.