Hong Kong Exchanges and Clearing Limited (HKEX) on Thursday published a consultation paper proposing to shorten settlement in the city’s cash market from T+2 to T+1, aligning with the standard already used in the US and India.
The proposal covers secondary-market transactions in equities, ETFs, structured products, REITs and SEHK-traded debt securities.
Primary market activities and Northbound Stock Connect trades are excluded.
Operational pressure
The shift from two-day to one-day settlement compresses every post-trade task, from trade confirmation and allocation to funding, FX conversion and securities borrowing and lending support. HKEX’s existing Delivery versus Payment Model 2 and batch-based settlement would remain in place, but all downstream processes would need to accelerate, according to Broadridge.
For investors in the US or Europe, T+1 in Hong Kong effectively creates a T+0 overnight processing requirement, Broadridge said. FX adds another layer of complexity: most currency settlement in Hong Kong still runs on T+2, meaning participants without HKD or RMB may need to pre-fund or secure same-day FX.
The tighter cycle also halves the recall window for securities borrowing and lending, increasing the need for real-time monitoring. ETF creation and redemption processes must similarly align with faster timelines or risk becoming bottlenecks.
Global alignment
The US, Canada and India have already implemented T+1. Europe, the UK and Switzerland plan to transition by October 2027, according to State Street. Broadridge estimates that nearly 90% of global equity turnover will soon operate on T+1 or faster.
State Street said adoption would reduce counterparty, market and liquidity risk while lowering clearing margin requirements.
Broadridge noted that HKEX is considering future enhancements once technical readiness is achieved, including real-time settlement instruction matching in 2026 or 2027. Local brokers, custodians and asset managers would need to upgrade post-trade workflows before HKEX sets a firm transition date.
