Next-day securities settlement, tokenisation and the transformation of Europe’s financial infrastructure

Less than a year from now, Europe will move to T+1 settlement, reducing the time from trade execution to final settlement from two days to one. The European Central Bank describes this shift as part of a wider transformation of Europe’s financial infrastructure, designed to improve efficiency, resilience and safety in financial markets. The change is intended to strengthen the competitiveness of European financial markets and support the EU’s goal of deeper, more integrated capital markets.

The ECB states that the transition to T+1 is not merely technical but acts as a catalyst for modernising post-trade processes across Europe. It requires greater standardisation, automation and innovation, exposing inefficiencies that were previously manageable under a T+2 cycle. The ECB, alongside the European Securities and Markets Authority and the European Commission, supports the market’s preparations to ensure Europe keeps pace with other major markets shortening their settlement cycles.

The Eurosystem operates TARGET2-Securities (T2S), a platform for securities settlement in central bank money that already supports shorter settlement cycles, including T+1 and T+0. To accommodate the shift to T+1, the ECB is adapting T2S processes, including changes to the night-time settlement process planned for June 2027 ahead of the October 2027 migration. The ECB will continue collaborating with market participants and authorities to ensure a smooth transition.

The ECB highlights that technology, including distributed ledger technology and tokenisation, offers opportunities to further streamline financial processes. Tokenisation could integrate issuance, trading, clearing, settlement, custody and asset servicing into a shared digital environment, potentially simplifying the architecture of finance beyond current settlement cycle changes.