UK to chop securities settlement time in 2027 | USAEMALL.com

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The UK will join the global move to cut the time to settle stocks and bonds in late 2027, aligning itself with an EU timetable in an attempt to attract more investors to London’s capital markets.

The government on Wednesday confirmed that Britain would switch to next-day settlement on October 11 2027, in a move aimed at boosting market liquidity.

“Speeding up the settlement of trades makes our financial markets more efficient and internationally competitive,” said chancellor Rachel Reeves.

The confirmation follows years of intense discussions in the City of London over the issue after the US modernised its settlement times last year. Market users in New York had complained that the standard two-day period held up customers’ money for too long, increasing credit risks and slowing the pace of trading.

Settlement is the typically mundane but important process of matching and legally transferring assets from sellers to buyers.

It was thrust into the spotlight in the US during the height of the coronavirus pandemic when some US companies including retail broker Robinhood blamed the two-day window for their systems being unable to keep up with increased trading volumes. The US, Canada and Mexico switched settlement for stocks, bonds and exchange traded funds in May 2024.

Industry discussions for the UK had been split over whether London should follow the US as fast as possible or align with the EU, which was taking a slower approach to the issue.

Last week Brussels confirmed it would also set an October 11 2027 timetable for a switchover, aligning itself with dates proposed by a UK government task force and Switzerland. The UK government task force had previously said it “warmly welcomed” the EU’s plan to move on the same date in October. 

The UK, EU and Switzerland are aligning their moves to single-day settlement to minimise trading disruption across the continent.

Bank of England governor Andrew Bailey said shortening the settlement window “will bring important financial stability benefits from reduced counterparty credit risk in financial markets”, adding that it was important for companies to “have robust plans for an orderly transition in October 2027”.

The UK Treasury made the announcement after Reeves met senior executives from large international financial institutions, including JPMorgan, BlackRock and Goldman Sachs.