FX Ecosystem 06 | T+1, the FX ecosystem and CLS: What a difference a day makes | ShapingFX series

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15 min read
28 May 2024
Dirk Bullmann
Managing Director, Office of the CEO

The global financial landscape is set to undergo significant transformation as the settlement cycle in the securities market shortens from T+2 to T+1. To the extent currencies must be exchanged to fund cross-border securities purchases, the shorter securities settlement cycle will limit the time allowed for the corresponding FX settlement cycle. CLS has been actively engaging with sell- and buy-side clients and industry bodies to better understand the implications of the T+1 shift on the FX community.

Global momentum toward T+1

Over the past 50 years, securities settlement cycles have shortened substantially, and this trend appears to have accelerated in recent years. When stock exchanges were established over 200 years ago, T+14 was the typical settlement period.

Between the 1970s and 1990s, the settlement cycle shrank to 7, 5 and then 3 days. T+2 became the rule for securities in 2014 for the European Union and in 2017 for the US. The shift towards T+1 is now gaining momentum worldwide (figure 1).

FX Ecosystem 06 - Figure 1
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