Background

On 14 October 2026, Commission Delegated Regulation (EU) 2026/1536 of 6 July 2026 (the Amending Regulation) was published in the Official Journal. The Amending Regulation amends the regulatory technical standards laid down in Commission Delegated Regulation (EU) 2018/1229 of 25 May 2018 on settlement discipline (the Settlement Discipline RTS) to improve settlement efficiency and facilitate the transition to a shorter settlement cycle (T+1). Furthermore, on 16 October 2026, ESMA published a final report containing revised guidelines (the Guidelines) on standardised procedures and messaging protocols. The revised Guidelines also support the EU’s transition to a T+1 settlement and promote greater automation across post-trade processes.

Settlement Discipline RTS

Regulation (EU) 2023/2845 (CSDR Refit) amended Articles 6(5) and 7(10) of Regulation (EU) No 909/2014 (CSDR), and conferred a mandate on ESMA to develop draft RTS setting out measures to prevent settlement fails and tools aimed at improving settlement efficiency. This mandate required an amendment to the Settlement Discipline RTS which ESMA consulted on in February 2025 (see our previous insights posts on the consultation and further T+1 developments here: Settlement Discipline: ESMA consults on measures to increase settlement efficiency and prevent settlement fails and T+1 Settlement Update: Commission proposes change to CSDR). As part of this review, and given the strong link between the ambition to shorten the settlement cycle and the broader objective of improving settlement efficiency, the ESMA consultation also considered what changes would need to be made to facilitate a transition to T+1.

The outcome of the consultation process is the Amending Regulation. In the context of T+1, the Amending Regulation facilitates the transition to T+1 by requiring:

• all written allocations and written confirmations to be provided by professional clients as soon as possible and by no later than 23:00 CET on the business day on which the transaction takes place (the trade date)
• all relevant settlement information to be provided by retail clients as soon as possible and no later than 23:00 CET on the relevant trade date
• as per the existing rules, investment firms to confirm receipt of allocations and/or confirmations within two hours[1]
• from 11 October 2027, central securities depositories (CSDs) to require participants to send settlement instructions as soon as possible and, where feasible, by 23:59 CET on the trade date

These client communication requirements do not apply where the client holds the relevant financial instruments and cash at the same investment firm. Professional clients and investment firms may also agree in writing that allocations and confirmations need not be sent where the firm receives the required information in advance of the deadline.

Revised Guidelines

The revised Guidelines were published in conjunction with the Amending Regulation. Considering that investment firms will need to receive their professional clients’ settlement details earlier than previously required, the revised Guidelines clarify how market participants should meet the new requirements. In particular, they deal with:

• the compulsory[2] use of electronic, machine-readable, standardised communication methods; and
• the adoption of international open communication procedures and standards for messaging and reference data.

Timing

The Amending Regulation provides for a phased application in order to ensure proportionality and to mitigate operational burdens. As such:

• provisions introducing shorter timeframes for pre-settlement processes that support the transition to T+1 apply from 7 December 2026. This is in order to provide market participants with sufficient time for testing
• most changes to how CSDs report and publish settlement fails will apply from 1 July 2027
• requirements that involve IT developments, such as CSDs’ functionalities aimed at enhancing settlement efficiency, will apply from 11 October 2027, the same day as the transition to T+1

The revised Guidelines apply in full from 7 December 2026.

Conclusion

With these publications, the regulatory framework is now ready for the transition to T+1. ESMA has called on market participants to finalise technical preparations, assess readiness across their entire ecosystems and begin testing as soon as possible throughout the trading and settlement chain. The Central Bank of Ireland (CBI) recently echoed this call in its 17th Markets Update.

Fund management companies should also be assessing the potential impact of T+1 on fund dealing, liquidity, cash management and settlement processes, and ensure appropriate readiness of key service providers and testing ahead of the transition.

If you require further information or assistance, please contact a member of our Structured Finance and Securitisation group, Asset Management and Investment Funds group or your usual Arthur Cox contact.

[1] Investment firms that receive the allocations and/or confirmations within less than one hour before their close of business must confirm receipt within one hour after the start of business on the next business day

[2] With an exception for cases of temporary technical unavailability or service disruption. Such circumstances must be documented and resolved without undue delay