The move to T+1 settlement

On 14th October 2026, the Malta Stock Exchange (MSE) published its trading and settlement calendar for 2027, and one notes that trades executed on the MSE on 8th and 11th October 2027 shall both have a settlement date of 12th October 2027. This is because on 11th October 2027, which is just less than twelve months away, the settlement cycle for shares and bonds traded on regulated markets across the European Union, the UK and Switzerland will be shortened from two business days after the trade date (T+2) to just one business day (T+1).

Malta, as an EU member state with its own regulated market and central securities depository, is also required to amend its settlement cycle on the same day. Although the change may appear to be a mere technicality only impacting some back-office procedures, at EU level it represents one of the most significant reforms of the European post-trade landscape in many years.

This change will have implications for every participant across the local capital market. It will affect retail investors buying shares or bonds on the secondary market, the members of the Malta Stock Exchange executing these orders as well as the local banks given their important role in the settlement cycle and also when acting as custodians for institutional investors.

The background behind the change

The settlement cycle in Europe had already changed before when in October 2014, European markets collectively moved from T+3 to T+2.

The reason for the upcoming change to a T+1 settlement cycle is that the US, Canada and Mexico also moved to T+1 in May 2024 as they joined other jurisdictions (principally China and India) in a shortened settlement period.

In view of the implications for global investors, it was widely viewed that Europe needs to be aligned with the other large capital markets across the world.

In November 2024, the European Securities and Markets Authority (ESMA) recommended a simultaneous migration across all relevant instruments and selected 11 October 2027 as the date for the changeover. The UK and Switzerland then agreed to change their settlement cycle on the same date given the manner in which several markets across Europe are interconnected especially as a result of a number of securities that are listed across various capital markets.

Preparations in Malta

Malta’s preparations were formalised in April 2026 when the Malta Financial Services Authority (MFSA) and the Central Bank of Malta (CBM) established a T+1 National Coordination Group. The CBM has important responsibilities for payment and settlement systems while the MSE participates as the sole national central securities depository.

The treatment of corporate actions will see important changes. Currently with a T+2 settlement cycle, the ex-dividend date falls one business day before the record date meaning that the last day on which an investor can buy shares and still be entitled to a dividend will be two business days before the record date. In company announcements of various companies, the record date and the last trade date are clearly highlighted while in other cases, only the record date is referred to.

Under T+1, the ex-dividend date and record date will fall on the same day. As such, as from mid-October 2027, the last day on which an investor can buy shares and still be entitled to a dividend will be the business day before the record date. Investors need to get accustomed to these changes and equity issuers need to continue to strive for improved transparency and guidance in all communications especially in view of the upcoming changes to the settlement cycle.

Implications for investors

For retail investors, the change is largely positive since sale proceeds will be available one day earlier. However, while some investors may be accustomed to purchasing shares and bonds on the secondary market and subsequently transferring funds to their stockbroker (MSE Member Firm), in the future, they will need to ensure that the clients account of their stockbroker is either pre-funded or, since this is not always possible, that funds are transferred immediately when processing purchase instructions since brokers will have less time under a T+1 settlement. In this respect, such investors would do well to ensure that they have the necessary arrangements in place with their banks to allow them to transfer funds quickly to their stockbrokers, including the increase of internet banking limits, and the use of instant payments where available.

Institutional investors would also need to ensure that the necessary adjustments are in place through their custodian and settlements team to adapt to a T+1 cycle.

In reality, T+1 does not mean that investors have 24 hours to effect settlement to their brokers. In Malta, the MSE operates a settlement system that will require brokers to have all funds collected from all investors by circa 10am on T+1. This means that in practice, investors may find themselves having only very few business hours to settle for any trades executed during the trading session on T+0.

Implications for MSE members and banks

For trading conducted on the MSE, stockbrokers already need to ensure that all trade allocations, confirmations and settlement instructions are processed with the MSE on a T+0 basis, and hence little change is envisaged in such processes. The main challenge for brokers will be the importance of timely settlement for trades by investors as explained above.

The banks are impacted in their roles as custodians, settlement agents, payment providers and also providers of foreign exchange.

In this respect, it is important to highlight that there are occasional delays currently being experienced in the movement of cash on settlement day between the various market participants and stakeholders, namely investors, stockbrokers, the MSE and the banks. Particularly when bank transfers are required between accounts held with different banks, cut-off times and other procedural or operational constraints across the banks sometimes delay the timely movement of funds between the various parties. Such delays are generally outside the direct control of stockbrokers.

Since these challenges already exist under the current T+2 environment, the compressed T+1 settlement cycle increases reliance on the timely movement of cash between all stakeholders in the settlement chain. All stakeholders, including the MSE, the CBM, the MFSA, MSE Members and commercial banks need to explore the type of changes that are required locally to improve the efficiency of cash movements between parties, especially when each party is using a different commercial bank. This is of fundamental importance to ensure a successful transition to a T+1 settlement cycle and also to improve the overall efficiency of, and ease of trading on, the Maltese capital market.

Moreover, despite the availability of instant payments across the banking system, retail investors face clear operational challenges in increasing their daily approved limits on internet banking, which cause challenges even under the current T+2 settlement cycle. All banks need to assist their customers and retail investors to have a more efficient way to perform instant payments. Otherwise, there is a clear risk that participation by retail investors in the local secondary market will continue to diminish, adding further problems to the liquidity of the local capital market.

In my view, the move to T+1 should not be seen merely as another regulatory obligation but an important development to reduce operational risk and modernise current practices. With less than a year to go, constructive consultation across the various parties is critical to achieve a much more efficient and streamlined process.

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