The evolving securities settlement landscape
The securities settlement environment is undergoing significant shifts, driven by regulations, technological advancements, and a push for lower costs and better efficiency. A major development is the industry’s transition to T+1 settlement cycles. As of 2025, many markets have adopted or are moving toward T+1, which offers opportunities such as reduced risk, improved liquidity, and lower operational pressures. However, this transition also brings challenges, particularly around settlement inefficiencies due to the compressed timeframe.
With T+1, post-trade processes like allocation, confirmation, settlement matching, and problem resolution must happen much faster. According to a recent ESMA report between March 2023 and February 2024, 7.14% of the total number of instructions were registered as settlement fails, a figure that could increase if firms don’t adapt to T+1 requirements quickly.
The pressure of a shorter settlement cycle
While T+1 settlement promises benefits, it also introduces new pressures, increasing the risk of operational errors. With less time between trade and settlement, firms have less opportunity to detect and correct issues before deadlines, leading to higher operational risk. Additionally, firms must ensure sufficient liquidity, which can become more challenging under the tighter timelines.
Cross-border transactions further complicate matters, especially with differing settlement cycles and time zones. Legacy systems, already strained by volatility and increasing transaction volumes, may struggle to keep up with T+1 demands. This shorter timeframe also makes it harder to resolve discrepancies, potentially leading to more unresolved issues and settlement fails.
The industry’s move to T+1 highlights the need for greater transparency and automation to address these challenges. Without improvements, the very initiative aimed at reducing risk could result in increased inefficiencies.
No single solution will deliver the transparency required across the securities post-trade space. Instead, a combination of regulatory measures and interoperating technologies are needed. Regulatory efforts are emphasising transparency at a critical time when emerging technologies are rapidly reshaping payments and settlement processes.
Artificial Intelligence (AI) and Machine Learning (ML) are being used for predictive analytics and process automation, while Distributed Ledger Technology (DLT) and blockchain are being explored for their potential to transform settlement. Real-time infrastructures are also becoming more common, pushing the industry toward real-time settlement capabilities.
Importance of transparency in the settlement lifecycle
Transparency in the settlement lifecycle allows participants to access real-time transaction data, including matching, clearing, and settlement status. This visibility helps market players make informed decisions, detect issues early, and ensure smoother settlements. As markets transition to T+1, transparency becomes even more critical for addressing inefficiencies, such as settlement exceptions.
The UTI, an industry-recognised standard (ISO 23897:2020), enables consolidation and interoperability across the securities lifecycle, enabling participants to track transactions more effectively. This increased transparency also helps streamline operations by reducing manual checks, speeding up settlements, and lowering costs. It can drive certainty for AI-powered systems to automate up to 90% of trade reconciliation tasks, significantly boosting efficiency.
Elements like the unique transaction identifier (UTI), combined with platforms and services such as Swift Securities View, and DTCC’s central matching service, CTM®, which generates UTI values as part of the electronic trade confirmation (ETC) are able to provide clients with near real-time insights.
With better visibility into the transaction lifecycle, market participants can reduce risks, enhance straight-through processing (STP), and support the industry’s move to shorter settlement cycles. This transparency fosters trust and collaboration, driving innovation and resilience in capital markets.
The challenge of data management in securities settlement
One of the biggest obstacles to transparency in securities settlement is data management. Financial institutions often operate multiple systems across different departments, creating data silos and inconsistencies. This fragmentation leads to significant inefficiencies, errors, and duplication of work in the settlement process. When dealing with various counterparties, each with their own systems and data formats, maintaining consistent and accurate data becomes even more challenging.
The UTI addresses these data management issues by providing a standardized reference across systems and counterparties. As a common identifier, the UTI ensures that all parties involved in a transaction are referring to the same data, reducing the risk of mismatches and errors.
Using a UTI simplifies many additional processes such as reconciliation, reporting, and understanding the history of a transaction, with applications across a firm’s internal departments and systems, as well as with external counterparties.
For international transactions, the UTI offers a standardised way to track trades, simplifying cross-border data management and reporting. This uniformity makes it easier to implement automated processes, increasing straight-through processing rates and reducing manual intervention.
The paradox of T+1 settlement lies in the potential for increased inefficiencies despite the aim of reducing risk. This challenge underscores the need for greater transparency, automation, and robust data management across the securities settlement lifecycle.
To successfully navigate the transition to T+1, financial institutions must embrace these principles. Trust between participants, transparency in data exchanges, and innovative solutions will be essential for addressing the complexities of modernising securities settlement. As the industry continues to evolve, adopting these approaches will be key to overcoming the challenges and capitalizing on the opportunities in the securities landscape.