[Exclusive] ‘Shortening settlement cycles’ pushed back to 2028...roadmap announcement already facing delays

[Financial News] The financial authorities’ push to shorten settlement cycles is running into difficulties. With the industry still unable to finalize estimates of the preparation period, foreign financial institutions are increasingly calling for a delay after Hong Kong recently postponed its implementation plan by a year. As a result, the roadmap announcement scheduled for this month is also set to be postponed. The authorities, too, see little benefit in moving ahead of other Asian countries and are leaning toward postponing implementation from the originally planned end of 2027 to the end of 2028.
According to the financial investment industry on the 21st, the working group meeting on shortening settlement cycles, held the previous day, failed to reach any meaningful conclusion on the roadmap, and no date was set for the next meeting. The working group, which includes the FSC, the Korea Exchange, the Korea Securities Depository and the Korea Financial Investment Association, has been discussing shorter settlement cycles since late last year.
The FSC had previously said in June that it planned to announce in October a roadmap for shortening the stock settlement cycle from the current ‘T+2 (two days later)’ to ‘T+1 (one day later).’ President Lee Jae-myung also called for shorter settlement cycles at a Cabinet meeting held that same month, saying, “From the perspective of stock market participants, it may be hard to understand why it takes as long as two days to get the money back after selling stocks.”
But announcing the roadmap this month, as originally planned, has effectively become impossible. The working group held marathon meetings lasting several hours but failed to coordinate and set a detailed schedule. Above all, difficulty estimating the industry’s preparation time has proved to be a stumbling block. An estimated 600 or so financial institutions—including securities firms, institutions and funds—will be affected by shorter settlement cycles. Since their capabilities and circumstances vary, preparation could take anywhere from six months to more than a year and a half, making it difficult to set a uniform schedule.
Foreign financial institutions were particularly forceful in their opposition. They have argued from the outset that they would need ample time to prepare, saying that currency conversion, time differences and regulations make settlement procedures more complicated for them than for domestic investors, increasing the burden of shortening the cycle.
The Hong Kong Exchanges and Clearing (HKEX) decision to defer the implementation of shorter settlement cycles has also become a factor. On the 16th (local time), HKEX officially announced that it would postpone the change by about a year, from the original fourth quarter of 2027 to September 2028. The explanation is that Korean authorities had also been developing a roadmap centered on implementation in the fourth quarter of 2027, in line with Hong Kong, but Hong Kong’s change of plans has caused a setback.
The working group, including the authorities, is now looking at the end of 2028 as the implementation date, in line with Hong Kong. This is because foreign financial institutions, which have strongly opposed the plan, are calling for implementation to take place at around the same time as in Hong Kong. They argue that capital markets are generally divided into regional blocs, and that large differences in implementation timing among Asian countries would increase the burden of system development. The United States, for example, shortened its settlement cycle alongside Canada, Mexico and others, while around 30 European countries are pursuing the change jointly.
Another factor is that major financial institutions in Asia are currently based primarily in Hong Kong. The Asia Securities Industry & Financial Markets Association (ASIFMA), which conveys the views of foreign financial institutions to the financial authorities, is also based there.
The authorities also say there is no reason to implement the change before Hong Kong. They say it would be advantageous to introduce it after observing other countries’ trial and error.
A source in the financial investment industry said, “At this point, rather than holding additional meetings, it is necessary to gather more views from the relevant institutions,” and added, “The authorities, too, will make a decision after giving the matter a great deal of thought.”

[email protected] Lim Sang-hyeok Reporter