Regulation (EU) 2026/1536: T+1 settlement discipline changes from 7 December 2026

Commission Delegated Regulation (EU) 2026/1536 of 6 July 2026 was published in the Official Journal on 14 October 2026. It amends the regulatory technical standards on settlement discipline in Delegated Regulation (EU) 2018/1229, which supplements the Central Securities Depositories Regulation (CSDR, Regulation (EU) No 909/2014). It is based on draft standards submitted by ESMA. The amendments follow Regulation (EU) 2025/2075, which shortens the standard settlement period from two business days to one business day (T+1) from 11 October 2027.

The Regulation enters into force on 3 November 2026, the twentieth day after publication, and applies in three steps. The rules for investment firms and their clients apply from 7 December 2026, so that firms can test well before T+1. Most changes to how CSDs report and publish settlement fails apply from 1 July 2027, although buy-sell back and sell-buy back transactions join the CSDs' fails monitoring from 7 December 2026. The new CSD functions that involve IT development, such as automatic partial settlement, apply from 11 October 2027, the same day as T+1.

Professional clients must send their written allocations in an electronic, standardised and machine-readable format, using the international open communication procedures and standards referred to in Article 2(1), point (34), of CSDR. Firms must ensure through contractual arrangements that professional clients confirm their acceptance of the terms of each transaction in writing in the same format; the confirmation may be part of the allocation. Unstructured methods are allowed only during a temporary technical outage or service disruption, which must be documented and resolved without undue delay. As today, these professional-client rules do not apply where the client holds the securities and cash relevant for the settlement at the same investment firm (Article 2(4) of Delegated Regulation (EU) 2018/1229, which is not amended).

The cut-off moves forward. Today professional clients must ensure that the firm receives allocations and confirmations by close of business on trade date where both are in the same time zone, or by 12.00 CET on the next business day where their time zones differ by more than two hours or the order was executed after 16.00 CET. From 7 December 2026 the firm must receive them "as soon as possible and by no later than 23:00 CET on the business day on which the transaction has taken place". The firm's existing duty to acknowledge receipt within two hours, or within one hour after the start of the next business day for messages received less than an hour before its close of business, continues unchanged, so firms should check that it copes with receipts up to 23:00 CET.

Allocations gain new fields: buy-sell back and sell-buy back transactions as a transaction type, the cash amount to be delivered or received, the identifiers of the delivering and receiving participants, and the place of settlement (PSET). Firms must require professional clients to apply the cash tolerance levels set by the relevant CSD, to provide all settlement reference data in a structured electronic format and to keep it up to date well in advance. Where the firm already has this information before the deadline, it may agree in writing with the client that allocations and confirmations need not be sent.

Retail clients must send all relevant settlement information by 23:00 CET on trade date as well, instead of 12.00 CET on the next business day as today, unless they hold the financial instruments and cash concerned at the same investment firm. For background on order allocation and client order handling, see our study note on best execution and order handling.

From 1 July 2027, settlement instructions must carry a place-of-trading field, filled with the Market Identifier Code (MIC) of the trading venue or another code based on international standards, so that a shift of settlement away from trading venues can be monitored. A transaction-type field that includes buy-sell back and sell-buy back transactions already applies from 7 December 2026. CSDs already identify their ten participants with the highest rates of settlement fails and have working arrangements with those of them that have the most significant impact on their settlement systems. From 1 July 2027 that ranking is based on each participant's share of fails relative to the whole settlement system, and CSDs must require those participants to report each month the main reasons for their fails and the measures taken. CSDs continue to report fails data monthly, by the fifth business day of the following month, and the separate annual report is removed. They will also publish fails data by type of instrument, with the main reasons and proposed measures.

From 11 October 2027, CSDs must require participants to send settlement instructions as soon as possible and, where feasible, by 23:59 CET on trade date. The recitals make clear that a later instruction is still processed and does not on its own trigger a cash penalty. Every CSD must offer automatic partial settlement, from which a participant may opt out, a release mechanism that can release held instructions in whole or in part, real-time gross settlement or at least three settlement batches a day, and access to intra-day credit through automated collateralisation. Where some instruments are available on the last day of the extension period, the instruction must be partially settled unless it is on hold.

Just under eight weeks separate publication from the first application date. Firms that deal in securities for professional clients should review their client agreements and onboarding terms, agree structured messaging with clients, brokers and custodians, collect complete standing settlement instructions including the place of settlement, and staff the two-hour acknowledgement process in the evening as well as during the day.

Firms with retail clients whose assets are held elsewhere should tell those clients about the 23:00 CET cut-off. Firms that are direct CSD participants and among a CSD's ten participants with the highest rates of settlement fails should prepare to report the main reasons for their fails and their measures to the CSD each month from July 2027. CSD participants should also decide whether to opt out of automatic partial settlement and plan to send instructions on trade date ahead of T+1 on 11 October 2027.