From 11 October 2027, settlement of trades in exchange-traded securities must be completed within one working day. Until now, traders have had two days to finalise them.
This ‘T+1’ requirement is being introduced following an amendment to the Central Securities Depository Regulation (CSDR), adopted in 2025. “This does not alter the conditions necessary for the successful completion of a transaction. However, the time available to carry out all the necessary operations is considerably reduced,” summarises Andrea Gentilini, Head of the Market Infrastructure Division at the CSSF, who also chairs ESMA’s working group on post-trading. “Until now, clearing, inventory or cash management could be carried out on T+1 to allow for settlement on T+2. In future, the organisation of post-trade flows will be significantly compressed.”
Adapt the templates
For market participants, this development entails a transformation of organisational and operational models, as well as the modernisation of information systems. “The activities currently carried out on day T+1 will need to be processed as soon as the transaction is executed, at T+0, and overnight so that they are completed by the end of day T+1. To achieve this, they could be transferred to teams located in other time zones,” explains Andrea Gentilini.
The transition comes as no surprise. The United States switched to T+1 in May 2024. Europe followed suit, with a view to improving market efficiency and reducing counterparty risk.
To support this transition, the CSSF has taken steps to keep market participants informed about these issues since November 2023 and, more significantly, over the past year. “Market participants have had ample opportunity to familiarise themselves with the subject and draw up a plan for adaptation. 2026 should enable everyone to implement the necessary changes,” continues Andrea Gentilini.
However, the changes required could be significant, particularly for smaller organisations. “It does not only concern the middle or back office. The entire chain is involved, from the front office right through to market infrastructure,” insists the CSSF official, who is calling on market participants to “take action now”: “Those who are unable to settle transactions on a T+1 basis by the set deadline may face difficulties operating in the market.”
Liquidity management under pressure
This transformation is not without its new challenges. “Whilst the settlement cycle moves to T+1, the subscription collection cycle often remains at T+3, or even T+4 in certain geographical areas,” explains ALFI through its Senior Vice President of Industry Affairs, François Baratte. “This time lag forces fund managers to finance trading operations even before they have received the corresponding funds. We are facing a ‘liquidity mismatch’. The acceleration of the investment cycle is at the expense of the financing cycle.”
In view of these liquidity issues, “risks of mismatches have been identified, leading in particular to temporary overdrafts, limited to 10% of the UCITS portfolio,” explains the specialist, adding that the CSSF has taken steps to address this concern: “Luxembourg is now the first jurisdiction where the national authority has introduced a regulated framework for passive over-limit positions in this area, in line with the European roadmap.”
This issue is particularly sensitive in Luxembourg, where international capital transactions are subject to longer processing times than on domestic markets. In light of these constraints, several options are available: optimising distribution channels, shortening fund settlement cycles, or making greater use of cash management mechanisms.
This article was written for the Asset management supplement of Paperjam magazine’s May 2026 issue, published on 29 April. It is published on the site to contribute to the full Paperjam archive. Click this link to subscribe to the magazine. Is your company a member of the Paperjam Club? You can request a subscription in your name. Please let us know via club@paperjam.lu
