FCA welcomes statement supporting faster settlement of trades in funds

We welcome the statement[1] by the Investment Association, Personal Investment Management & Financial Advice Association, and Alternative Investment Management Association supporting the faster settlement of trades in funds.

The settlement period for transactions in listed stocks and bonds in the UK, Switzerland and EU will change to T+1[2] from 11 October 2027. 'T+1' means if you buy a stock or bond, it will be settled within 1 business day. Currently, deals in units of UK funds investing in stocks or bonds typically settle on T+3 or, in some cases, T+4.

Faster settlement makes our markets more efficient, improves liquidity and supports the growth and competitiveness of the UK.

Investors in UK funds should also share in those benefits through a corresponding reduction in the time taken to settle trades in fund units. We recognise that the operational practicalities of fund settlement will not allow all authorised fund managers to offer T+1 settlement for units in funds.

For UK authorised funds and recognised schemes investing predominantly in markets that will operate on T+1 settlement, we believe that moving trades in fund units to T+2 settlement would be in investors’ interests. This would be consistent with the Consumer Duty[3] requirement to enable and support retail customers to pursue their financial objectives. 

Funds which currently operate on T+4 settlement should consider carefully how an extended gap between market settlement and fund unit settlement would affect investors.

Fund managers and their agents should in future need strong justification for cases where, exceptionally, more than 2 business days are required to settle trades in units of these funds - for example, that target investors cannot themselves settle with the fund on T+2.

Fund managers should determine what's required to move to a T+2 settlement cycle in October 2027 and plan early to deliver this transition.