The move to T+1 settlement represents a major post-trade milestone for the UK and Europe. But according to Richard Baker, CEO and Founder of Tokenovate, success will not be determined by faster processing alone. It will hinge on how effectively firms manage expectations.
The shift to one-day settlement will have a significant impact on how trades are managed, compressing everything from trade confirmation to delivery into a matter of hours, with the current T+2 settlement window effectively being cut in half.
Under T+2, post-trade operations benefited from time. Exceptions that emerged late in the day could be investigated and handled overnight, providing firms with a vital buffer to reconcile data, correct errors, and coordinate with counterparties. T+1 removes that safety net entirely.
Instead, firms will have a two- to five-hour intraday window. This means that if an exception isn’t resolved in that time, the trade fails, and so does the firm’s obligation.
By the T+1 deadline in October 2027, trades must be affirmed and allocations must be accurate, Standing Settlement Instructions (SSIs) must be correct, and exceptions must be identified and resolved. A single misstep could trigger failed trades, causing costly financial, operational, and reputational ripple effects across the entire organisation.
Experience from markets such as the US shows how quickly settlement pressure begins to concentrate around unresolved exceptions.
In this environment, exception management, which is the invisible infrastructure of post-trade operations that identifies, investigates, and resolves discrepancies that arise during settlement, becomes the central pressure point in T+1 settlement. The ability to resolve these quickly and consistently determines whether firms meet their obligations at all.
Impact of poor exception handling
Common settlement breaks originate from mismatched or incomplete trade details, missing trade affirmations, incorrect allocations, invalid or outdated SSIs, and delivery failures due to insufficient holdings.
Resolving these exceptions requires coordination across multiple teams using different systems, often involving manual processes and fragmented workflows.
Within compressed T+1 timelines, this coordination challenge is magnified. Operations teams must identify root causes, communicate with counterparties, update trade records, and ensure compliance with regulatory obligations, all within hours rather than days.
These failures are not isolated operational issues; they ripple across the organisation. CFOs see immediate P&L impact from settlement failures and collateral inefficiencies. Treasury teams face trapped liquidity and misallocated capital. Risk and Compliance functions struggle to maintain real-time oversight and auditability. IT departments are under pressure to integrate and scale systems and modernise fractured workflows at speed.
Without a coordinated, real-time strategy for exception management, firms will struggle to meet T+1 settlement obligations, and investors will ultimately bear the consequences.
Lessons in automation from the US
When the United States transitioned to T+1 in May 2024, many financial firms struggled despite significant lead time. Rising trade fail rates plagued cross-border and FX-linked transactions and post-trade pressure intensified as exception windows shrank. Manual SSI processes relying on spreadsheets also caused persistent breaks, while coordination issues with counterparties using outsourced back offices exacerbated the challenges.
These issues led to high industry-wide compliance costs topping $30 billion, with smaller firms disproportionately affected by legacy infrastructure and manual processes.
The firms that performed best automated early. By proactively automating data pipelines, exception workflows, and settlement instructions, these institutions reduced fail rates and enhanced operational resilience within weeks.
From reactive to proactive exception management
Financial institutions must recognise that moving to T+1 is an opportunity to radically improve post-trade operations by transforming how exceptions are handled, and is not just a question of meeting regulatory deadlines.
Success requires a fundamental shift from reactive to proactive exception management. Firms must convert and standardise inbound trade formats immediately at ingestion, creating shared, unified trade records accessible to all post-trade stakeholders. They need to automate trade affirmation and allocation processes, instantly identifying exceptions and triggering targeted resolution workflows that cut handling times from hours to minutes.
Advanced capabilities also matter. AI-driven decision support can detect root causes, simulate resolution paths, and prioritise actions, providing operations teams with answers, not just alerts. For firms ready to embrace it, deterministic real-time settlement through tokenisation can completely eliminate timing risk.
The benefits of this integrated approach are evident. It results in fewer exceptions, faster settlement that frees liquidity, lower collateral and operating costs, improved regulatory reporting, and stronger alignment across operations, IT, treasury, and compliance.
The window for preparation is closing, and complacency is not a winning strategy. The U.S. experience proved that half-measures and last-minute efforts lead to failed trades and ballooning costs, so the transition demands action now.
Firms that transform their exception management capabilities today will not only survive T+1, they will emerge stronger, more efficient, and better positioned for the future of securities settlement.
Learn more:
1) The Accelerated Settlement Taskforce Technical Group UK Implementation Plan for first day of trading for T+1 settlement – 11th October 2027: Report.
2) EU T+1 Industry Committee: Report.