FCA Sets Out T+1 Settlement Expectations for UK Asset Managers and Alternative Firms

On 23 October 2025, the Financial Conduct Authority (FCA) published a letter directed at firms within its Asset Management and Alternative Firms portfolio, setting out expectations for the UK’s transition from T+2 to T+1 securities settlement on 11 October 2027 (the Letter).

The Letter follows the Accelerated Settlement Taskforce’s (AST) February 2025 Implementation Plan and signals regulatory concern that smaller firms may be under prepared for the operational changes required.

Regulatory Context

The UK Government has confirmed its intention to legislate, requiring all transferable securities traded on UK trading venues and settled on UK central securities depositories (unless exempted) to settle on a T+1 basis from October 2027. The UK’s move to T+1 settlement aligns with international market developments, including the EU’s planned transition also scheduled for October 2027 and following the US transition in May 2024.

The FCA explicitly supports the transition, citing benefits including improved liquidity, enhanced market efficiency, and strengthened UK competitiveness. However, the regulator has identified, through firm engagement and data analysis, that some small and medium-sized asset managers and alternative firms may lack awareness of the required changes. 

Timeline and Key Actions

The FCA has set clear expectations across three phases:

1. By end-2025: 

Firms are expected to familiarise themselves with the AST recommendations, establish project plans, identify necessary changes, and secure implementation funding. The regulator indicates that firms should conduct end-to-end reviews of trading, clearing and settlement arrangements, identifying manual processes requiring automation and reviewing inventory management for cash and securities positioning.

2. By end-2026: 

Implementation of identified changes should be completed, including standardisation of Standard Settlement Instructions (SSIs) and trade date timing for allocations and confirmations. Engagement with settlement agents regarding operational requirements and co-ordination with outsourced providers is also noted. 

3. During 2027: 

Firms should be undertaking internal and external testing of amended settlement processes, with sufficient lead time to address identified issues before the October deadline.

Operational Considerations

The Letter highlights several practical requirements. Firms outsourcing trading, settlement or operational services retain responsibility for ensuring smooth transition. In addition, securities lending firms should prepare for timely recalls, notifying intermediaries promptly when sales trigger recall requirements. 

The FCA endorses the joint recommendation from the Investment Association (IA), Personal Investment Management & Financial Advice Association (PIMFA) and Alternative Investment Management Association (AIMA) for voluntary fund settlement timing changes to T+2 ahead of the October 2027 deadline, aligning with the AST’s assessment that T+2 provides optimal cash management flexibility while minimising funding gaps against T+1 settling products. 

Supervisory Approach

The FCA will monitor progress through ongoing supervision and may request that firms provide their T+1 implementation plans. The regulator has also established a dedicated T+1 webpage for updates and encourages firms to engage proactively regarding implementation challenges. 

The Letter and T+1 webpage are available here and here, respectively.