FCA Warns Some Firms Risk Falling Behind as UK T+1 Settlement Deadline Approaches

The UK Financial Conduct Authority (FCA) has issued a warning that some market participants are significantly behind in preparing for the country’s transition to T+1 securities settlement raising concerns about operational readiness ahead of the 11 October 2027 implementation deadline.

In an assessment of industry preparedness the FCA said that while many firms have made solid progress a number of participants have yet to complete project plans identify required operational changes or begin meaningful implementation work. The regulator made it clear that firms that fail to prepare could face regulatory action.

The move to T+1 will shorten the settlement cycle for securities transactions from two business days after trade execution to one requiring post-trade processing, greater automation and closer coordination across the financial ecosystem.

Why T+1 settlement matters

The T+1 transition represents one of the significant operational changes to the UK securities market in decades.

A shorter settlement cycle is expected to reduce counterparty risk, settlement exposure and capital requirements while improving market efficiency and liquidity.

The FCA believes the change will ultimately free up capital for investment and strengthen the competitiveness of UK markets.

However achieving those benefits will require firms to modernize back-office operations and eliminate inefficiencies in trade processing and settlement workflows.

Most firms are making progress

The FCA said that most firms it has engaged with have broadly met its expectations.

Many participants have

•  finalized T+1 project plans,
•  secured governance and funding
•  advanced implementation work,
•  and prepared for industry-wide testing.
• Some firms have moved faster with major system changes already completed and testing scheduled to begin later in 2026.

The regulator said these firms are treating T+1 not as a compliance requirement but also as an opportunity to improve settlement performance and reduce operational costs through automation.

Buy-side readiness remains a concern

Despite progress the FCA said that buy-side readiness remains a key area of concern.

The regulator continues to hear that many asset managers, investment firms and other buy-side participants have made implementation progress.

This aligns with industry survey findings suggesting that a large proportion of buy-side firms had not yet begun T+1 implementation work during 2026.

The FCA said it will pay attention to this sector and may take further action if firms do not accelerate their preparations.

Some firms are significantly behind

The regulator expressed concern about firms that have not yet finalized implementation plans.

In some cases firms were unable to explain what changes they need how they plan to meet industry deadlines or how they will participate in testing.

A small number had not familiarized themselves with the UK Accelerated Settlement Taskforce (AST) implementation recommendations.

The FCA warned that poor preparedness creates risks not for individual firms but also for the wider settlement system.

Automation is becoming

One of the FCA’s strongest messages is that automation will be critical for successful T+1 implementation.

When American markets transitioned to T+1 firms with higher levels of automation generally achieved better settlement performance and experienced smaller increases in operating costs.

Automation also helped reduce clearing-related funding requirements.

The FCA expects firms to accelerate investment in automated trade allocation, confirmation, settlement instruction management and exception processing.

Trade date processing becomes the standard

A major milestone for 2026 is the industry expectation that trades should be allocated and confirmed by the end of trade date (T).

The FCA said that roughly half of the firms it spoke with meet that standard as part of their normal operating model.

Firms that do not currently meet the target have generally identified the causes of delays. Are working to address them.

The regulator also welcomed progress on the adoption of settlement instruction (SSI) sharing practices across the market.

Third-party providers face growing pressure

The FCA emphasized that settlement readiness depends heavily on custodians, technology vendors and other third-party service providers.

Many firms told the regulator that service providers had not yet communicated detailed implementation plans or operational deadlines.

According to the FCA providers should already have finalized their T+1 implementation strategies. Shared them with clients.

The regulator said it will engage directly with third-party providers to assess their readiness.

Settlement failures remain a risk

The FCA also examined firms’ understanding of settlement performance.

Prepared firms were generally able to explain their settlement failure rates, the main causes of failed settlements and the actions they are taking to improve performance.

The common causes of settlement failures include counterparties failing to deliver securities, mismatched settlement instructions and inventory management problems.

The regulator said firms must understand these weaknesses before T+1 goes live.

Fund settlement cycles may need to change

The FCA also discussed industry recommendations encouraging buy-side firms to move fund settlement cycles to T+2 of the broader T+1 securities transition.

Although many firms support that objective only a minority have developed implementation plans.

The regulator warned that maintaining longer fund settlement cycles could create mismatches with the faster securities settlement timetable.

The bottom line

The FCA’s assessment suggests that the UK’s T+1 settlement transition is broadly on track but important gaps remain across parts of the market particularly among some buy-side firms and service providers.

With over a year remaining before industry-wide testing intensifies the regulator expects firms to accelerate implementation improve automation engage clients and counterparties and address settlement inefficiencies.

The message from the FCA is increasingly clear: T+1 is not simply a deadline but a structural modernization of the UK securities market and firms that fail to prepare risk becoming the weakest link, in the settlement chain.

T+1 Settlement: are firms ready for 2027? – FCA

buy-side firmscapital marketscapital markets technologycustodiansFCAfinancial infrastructurefinancial regulationinvestment firmsMarket Infrastructureoperational resiliencepost-trade automationsecurities clearingsettlement efficiencysettlement modernizationT+1 SettlementTheFinRateTrade SettlementUK FinanceUK financial marketsUK securities settlement