UK capital markets eye atomic settlement, but readiness lags confidence

The UK's capital markets are heading towards a compressed settlement deadline with confidence running well ahead of operational reality, according to new research commissioned by post-trade automation firm Tokenovate. The survey of 250 senior post-trade professionals, conducted by Censuswide between June and July 2026, maps the gap between industry ambition and the infrastructure actually in place as the October 2027 T+1 deadline approaches.

The headline finding is striking. While 83% of respondents say they expect to meet the T+1 transition, only 32% describe themselves as fully prepared today, with compatible workflows, systems and operations already in place. Meanwhile, 59% of firms have not fully funded their T+1 readiness and broader post-trade transformation programmes.

Automation is widespread but structurally incomplete

Nearly all respondents report at least partial post-trade automation, and 84% describe their operations as fully or substantially automated. Yet almost the same proportion simultaneously identify at least one function that still depends significantly on manual processing. Allocation management, reconciliation, trade confirmation and collateral management, the very processes that must accelerate under a shortened settlement cycle, remain the most manual-intensive.

The barriers are spread across the operating model rather than concentrated in any single fixable defect. Legacy systems and cost constraints were each cited by 16% of respondents as the leading obstacle, followed by a lack of internal skills at 14%, regulatory uncertainty at 13%, and insufficient industry-wide coordination at 13%. Crucially, 80% say their ability to modernise is severely or significantly constrained by dependencies on external counterparties and market infrastructure providers. Only 2% believe they can progress largely independently.

Data fragmentation compounds the problem. Some 88% of respondents describe it as a critical or significant challenge. Awareness of the FINOS Common Domain Model, the cross-industry open standard for representing financial transactions, is near-universal at 93%. But active implementation sits at just 38%, underlining the gap between knowing a solution exists and embedding it in live systems.

Atomic settlement moves from aspiration to near-term expectation

Beyond T+1, the research points to a market preparing for a more fundamental shift. Nearly eight in ten respondents say T+0 or real-time settlement is already on their organisational agenda, and 63% are either live with or piloting tokenised settlement. Respondents expect widespread UK atomic settlement within an average of 3.7 years, suggesting the next major settlement transition will follow T+1 in relatively quick succession rather than after a comfortable planning horizon.

The economic case is broadly accepted. Almost all respondents regard trapped liquidity as a material cost or risk, with 36% describing it as highly material and quantified. The outcomes firms most value from real-time settlement span regulatory certainty, liquidity release, interoperability and reduced operational risk, rather than simple cost-cutting, which suggests the business case is being framed as an operating-model upgrade rather than a headcount exercise.

For cross-sector investors and policy analysts, this matters beyond the immediate scope of UK securities settlement. The infrastructure decisions being made now, around data standards, workflow interoperability and tokenised asset frameworks, will shape the connective tissue between traditional capital markets and the emerging digital asset economy. Tokenised repo has already been identified as an initial priority in the Wholesale Digital Markets Champion's first report to the Chancellor, published in July 2026. Whether the CDM and analogous standards achieve genuine adoption in the T+1 build cycle, or are again deferred to a separate initiative, will determine how quickly that connective tissue becomes functional at institutional scale.

The geopolitical dimension is also live. London ranks second in the 2026 Global Financial Centres Index, with the four leading centres separated by a single rating point. The UK's legal framework, deep liquidity pools and active regulatory dialogue are genuine competitive assets. But 48% of survey respondents see meaningful competition from other financial centres in the race to lead on digital market infrastructure. Singapore and the EU, each advancing their own tokenisation and settlement modernisation agendas, are the obvious comparators. The UK's window to establish itself as the reference model for integrated, legally certain atomic settlement is real but not guaranteed.

Tokenovate's research points to three sequenced priorities: standardising data through live CDM implementation, connecting automation across organisational boundaries rather than within them, and orchestrating settlement across both legacy and tokenised infrastructure. Firms that treat the October 2027 deadline as a foundation rather than a finish line, the report argues, will avoid the cost of revisiting the same processes when T+0 becomes commercially unavoidable.