For FX, while the effects may be second order, they require attention. Compressed timelines for funding, hedging and settlement tied to securities flows introduce new risks: tighter operational windows, greater dependency on custodian cutoffs and less margin for error. 

Yet there is a silver lining: organizations that treat T+1 as an opportunity to modernize operations and strengthen resilience will emerge with reduced risks and greater efficiency. 

Quantifying the FX T+1 challenge

During the North American transition, the market was concerned that timing mismatches could impact funding, particularly for Asia Pacific investors in US securities.  

For organizations in the FX space, these concerns are less acute in Europe, where business hours more closely align with CLS’s timeline for funding and settlement. Our transaction data analysis suggests the move to T+1 in Europe will impact only around 0.4% of CLSSettlement’s average daily settlement value in the EU and Switzerland and 0.1% in the UK.  

Although seemingly minor, with daily FX turnover exceeding USD7.5 trillion globally, even a fraction of a percent is material. Billions in flows will need to be funded and settled more quickly.  

Risks include timing mismatches between securities and FX funding windows, valuation risk in volatile markets, missed custodian cutoffs, and the need to prefund trades that aren’t eligible for payment-versus-payment settlement.  

Despite Europe and the UK’s closer alignment with the CLS settlement window, this kind of pressure could increase on peak days or when cross-border flows and custodian practices diverge.  

Automatically advancing
 
Fortunately, we have the North American experience to learn from. While the transition to T+1 was generally smooth in terms of managing liquidity and operational risk, individual organizations struggled with new operational challenges.  

These experiences brought new urgency to an old problem: post-trade automation. For too long, operations have been seen as a cost centre, not a strategic priority. Under T+1, however, manual steps become structural risks. That should give operations teams and the back office more impetus to make the case for investment.  

Indeed, we’re seeing encouraging momentum in this direction. Market participants and service providers are automating confirmations, netting and exception management. As a result, we’ve seen a rise in buy-side demand for our post-trade monitoring and reporting services. 

Collaborate for success

Collective preparation, steered by trade bodies, was critical to the smooth transition in North America. All organizations, regardless of size, should engage with the broader financial community on T+1.  

In Europe, while timing windows are more aligned, the market structure is more fragmented across currencies, custodians, securities depositories and legal frameworks.  

This complexity makes broad market collaboration essential. CLS, for example, co-leads the EU’s T+1 Working Group workstream, an initiative set up by the European Securities and Markets Authority, European Central Bank and the European Commission. The workstream has mapped industry challenges and delivered findings to a broader working group. Now, the focus turns to implementation.  

From compliance to strategy 

Getting T+1 right is about more than being ready for 2027. It’s about futureproofing for a world that’s moving to shorter settlement cycles. The Asia Pacific region is likely to undertake its own move to T+1 in 2030. We’re even seeing more demand for same-day settlement. In our bilateral payment netting calculation service, same-day flows are increasing among the sell side, and we are onboarding ever more buy-side firms.  

FX firms should treat T+1 as a strategic opportunity. Now is the time to invest in post-trade automation. Those who act early will be well positioned for the next stage of market evolution: shorter or more frequent settlement cycles and a more liquidity-efficient FX market.