With the successful shift to T+1 now behind the U.S. equity markets, attention is turning to a more ambitious target: same-day settlement, or T+0. As crypto markets embrace near-instant settlement and investors expect real-time experiences, the traditional equity settlement model is being reevaluated.

“The appeal of T+0 is straightforward,” said Rich Robinson, Chair of ISITC. “In theory, it reduces counterparty risk, frees up margin, and aligns capital markets with the ‘instant’ experience investors expect elsewhere.” 

“Broker-to-broker exchange transactions are already highly automated, so you can see why T+0 might be feasible in that limited context,” he told Traders Magazine.

While the move to T+1 in the US “was a success,” according to Valentino (Val) Wotton, Managing Director and Global Head of Equities Solutions, DTCC, it is important to note that a full-scale, industry move to T+0 would require a fundamental transformation of market infrastructure, processes, and operations.

He further said that while there are benefits to operating on a T+0 settlement cycle, such as a reduction in clearing fund capital and counterparty risk, it is important to note that it is not without trade-offs and challenges, including the potential for settlement cycle mismatches with most global markets considering or working towards a T+1 settlement cycle. 

Additional alignment around foreign exchange and securities lending practices would likely also need to be addressed, he said.

Understanding Real-Time T+0

However, as Larry R Tabb, Head of Market Structure Research at Bloomberg Intelligence, explained, the road from T+1 to T+0 is far more complex than it may appear.

Tabb pointed out that the term T+0 isn’t as “clear-cut as it sounds”. “There’s T+0 end-of-day, and then there’s T+0 real time,” he said, noting that the two represent fundamentally different market behaviors. End-of-day T+0 would still allow for netting—a process where trades are offset against each other to reduce the number of final settlements. Real-time T+0, however, means instant settlement for each individual trade, also known as atomic or gross settlement.

“It telescopes the investor’s intention,” Tabb warned, particularly when discussing large institutions like Fidelity or BlackRock. If those firms had to pre-fund trades—holding either stock or cash before execution—it could inadvertently leak market-moving information, he said. That, he explained, could become a serious risk for institutional investors, both from a strategic and regulatory standpoint.

One of the major challenges in moving to real-time settlement is the role of market makers, who provide critical liquidity by continuously buying and selling securities, often going short or long in the process, Tabb said.

Under a real-time T+0 system, market makers could no longer sell shares they don’t already own, he explained. That would fundamentally break their current model, forcing them to either pre-buy securities or borrow in advance, he added.

In today’s market, high-frequency trading firms execute thousands of trades a day, many of which cancel each other out, Tabb said, adding that these are netted and settled in bulk at the end of the day. “Under a real-time regime, each trade would need to settle individually, leading to massive operational overhead and infrastructure strain,” he said.

Wotton noted that T+0 settlement is distinct from atomic settlement, which moves away from clearing practices since there is no longer counterparty risk enabled as settlement is handled instantaneously. 

“While atomic settlement and asset tokenization, enabled by DLT, could create new value by adding use cases for intraday/afterhours collateral and trading, real-time gross settlement (RTGS) may not necessarily be more efficient than the current netting system for existing activity, which provides significant benefits that reduce settlement cost, complexity and the need for pre-funding each trade,” he said.

Lessons from T+1 

When the U.S. moved to T+1 settlement, many expected operational headaches, especially for foreign investors trading in U.S. markets, but the transition proved surprisingly smooth, Tabb noted.

“We thought it was going to cost a lot more,” Tabb said. While settlement fail rates briefly ticked up, they quickly normalized. Whether banks extended intraday credit or lent out securities behind the scenes is unclear—but challenges were minimal, he noted.

However, Tabb stressed that T+1’s success shouldn’t be mistaken for T+0 readiness. “The leap from T+2 to T+1 was largely evolutionary. T+0, particularly real-time T+0, would be revolutionary, requiring a complete overhaul of how trades are processed, cleared, and settled,” he said.

According to Robinson, more than a year into T+1, a few frictions stand out. He mentioned that cross-border FX funding was a major one, especially for Asia-Pacific investors who, in practice, were already on a T+0 basis for U.S. trades because of the time-zone difference. “That led to pre-funding challenges and, in some cases, higher costs,” he said.

“We also saw that exceptions – mismatched or incomplete trades – became much more painful under T+1. With less than a full day to fix breaks, the pressure on custodians, counterparties, and operations staff increased significantly,” Robinson said. 

“Small and medium-sized managers in particular often relied on manual or portal-based processes that don’t scale well under tighter deadlines. Those frictions would be magnified under T+0, where there is virtually no buffer to resolve issues if something goes wrong,” he added.

While the US’ move to T+1 was smooth, post-implementation reviews revealed some areas still in need of improvement – particularly in foreign exchange, corporate actions, stock lending, fund settlement cycles, time zone challenges and the need for greater automation across the post-trade lifecycle, Wotton said.

DTCC believes the immediate focus should be on global harmonization around T+1, including the modernization of key systems as well as broader adoption of automation, as pockets of manual processes and inefficiencies remain, he said.

“By focusing on these areas, we will help unlock greater efficiency, reduce risks, and lower cross-market friction within a T+1 settlement cycle,” he added.

Where the Industry Stands Today

When asked if real-time T+0 is even feasible, Tabb said: “In traditional equities, no. If you had a tokenized version of an equity, then yes.”

He added that for T+0 to be even remotely viable, funds would need far greater control over their cash and securities. That could mean consolidating brokerage and custody relationships—something many asset managers are wary of due to potential conflicts of interest.

Alternatively, blockchain-based platforms could facilitate direct, atomic settlement across firms—but integrating such systems with existing bank infrastructure would be a monumental challenge. “That’s not going to be easy,” Tabb cautioned.

“There’s a fair amount of thinking about T+0,” Tabb said. “But I don’t think there are a whole lot of people in the equities world seriously looking at real-time gross settlement.”

From ISITC’s perspective, the more complex investment manager to broker flows are where the real challenges lie, Robinson said.

“T+1 already showed how difficult it is to manage FX funding, securities lending, and corporate actions in compressed timeframes,” Robinson stressed. 

For small and mid-sized firms without the budgets to overhaul infrastructure, shortening the cycle again could mean higher costs and more operational risk, he noted. 

“So while there are strong arguments in favor, we need to be realistic about what it would mean for the broader ecosystem, not just the most automated segments,” he said.

Robinson added that there’s been a lot of energy around distributed ledger and AI pilots, and they’ve proven useful in showing what’s possible. 

DLT, for example, he said, can support instantaneous settlement in controlled environments: “AI is helping firms detect and route exceptions faster. And clearing infrastructure continues to evolve to handle shorter cycles.”

“But pilots aren’t the same as production at scale. What T+1 taught us is that when something goes wrong – a block allocation issue, a securities loan recall, an FX mismatch – those problems still require people and processes to resolve,” he said.

“Technology can highlight issues more quickly, but it can’t eliminate them. That’s why, for the foreseeable future, T+0 may be possible for certain broker-to-broker transactions, but much less realistic across the full investment management workflow,” he added.

Wotton stressed that DTCC stands ready to support the industry with the infrastructure, expertise, and collaboration needed to navigate future advancements in settlement cycle timeframes while remaining committed to ensuring market stability and enabling innovation across the financial ecosystem. 

“Should the industry coalesce around a move to T+0, and with regulatory support, DTCC will advance efforts to meet this need,” he said. 

“At the same time, as the market ecosystem evolves, we may see more RTGS capabilities that support lending, for example, which may decrease the costs associated with pre-funding and could make RTGS more attractive over time,” he concluded.