ECB Prepares Financial Infrastructure for New Settlements

The European securities market will transition to T+1 settlement on October 11, 2027, which provides for the completion of most transactions on the next business day after the trade. The European Central Bank (ECB) views the reform as part of a broader modernization of financial infrastructure, including the development of tokenized assets.

This was announced on October 29, 2026, by ECB Executive Board member Piero Cipollone. According to him, reducing the settlement cycle from T+2 to T+1 will decrease the risks of unsettled transactions and enhance the efficiency of the European financial market. However, the transition will require revising transaction processing procedures and increasing settlement automation.

How the transition to T+1 will change the financial market

Under the current T+2 cycle, settlements for most eligible trades are completed within 2 business days. The new scheme reduces this period to 1 day, decreasing the time during which parties remain at risk of non-fulfillment of obligations.

At the same time, banks, brokers, and other market participants will have less time for transaction reconciliation, error correction, and securing necessary funding. The changes are particularly significant for companies operating in multiple jurisdictions and currencies, as they must coordinate settlements across different financial systems.

Meanwhile, the European settlement platform TARGET2-Securities (T2S), which facilitates securities transactions in central bank money, already supports T+1 and T+0 settlement schemes. Therefore, the transition does not require building new infrastructure from scratch, although certain processes need to be adapted to the shortened settlement cycle.

Tokenization will remain a separate development direction

In parallel, the Eurosystem is exploring the possibilities of tokenizing securities and using distributed ledger technologies for financial transactions. Such solutions potentially allow for the integration of issuance, circulation, storage of assets, and settlements within a unified digital infrastructure.

However, tokenization is not a mandatory condition for transitioning to T+1. Even when using digital tokens, market participants must ensure legal recognition of ownership rights, payment execution, data reconciliation, and compliance with financial regulations.

The ECB also does not view new technologies as a complete replacement for existing systems. Traditional settlement platforms will continue to operate alongside the tokenized infrastructure, the development of which remains a long-term goal.

By October 2027, European market participants must complete the technical preparation and testing of new settlement processes. However, the transition to T+1 does not imply the automatic implementation of blockchain settlements, and the timelines for broader technological modernization are determined separately.