Korea Exchange has in effect selected Anjin Accounting Corp. as its consulting partner to lay the groundwork for a shift to T+1 securities settlement. The move comes as Europe and Hong Kong follow the United States into the T+1 camp, and as President Lee Jae-myung has called for an accelerated timeline, adding momentum to the domestic transition effort.
According to the financial investment industry on Friday, two firms — Anjin and Samil PwC — submitted bids for a "securities market settlement cycle shortening consulting" contract jointly commissioned by Korea Exchange and Korea Securities Depository. In a combined evaluation of technical and price scores, Anjin outranked Samil PwC, sources confirmed. Korea Exchange plans to finalize a contract with Anjin shortly.
The contract runs up to six months from the signing date and is set to conclude by the end of December. The fee is capped at 600 million won ($408,000), split equally between Korea Exchange and Korea Securities Depository. If the schedule holds, a final report will be delivered by the end of December.
Korea Exchange restricted eligibility to consulting firms with a track record in capital market infrastructure consulting since 2016. The evaluation criteria also assessed whether bidders had in their networks professionals who had worked on T+1 projects at overseas exchanges or depositories, and whether they maintained broad ties with foreign exchanges — a clear signal that Korea Exchange intends to absorb hands-on experience from countries that have already made the switch.
Under the current system, proceeds from a stock sale are credited to the seller's account two trading days after the transaction. Korea Exchange and Korea Securities Depository are working to cut that to one day, targeting implementation in the second half of next year.
The centerpiece of the consulting work is designing a "T+1 standard operating model" covering the entire clearing and settlement process, and drafting practical operational standards that can be applied immediately by sector, phase and function.
Specific tasks include a review of how North America, Europe and major Asian markets pursued T+1 and the setbacks they encountered; an analysis of benefits in terms of capital efficiency, global alignment and market risk reduction; design of a standard T+1 clearing and settlement operating model; preparation of sector-specific operational standards; construction of a transition timeline; collection of views from domestic and overseas market participants; identification of legislative and regulatory amendments needed; and research into the blockchain-based clearing and settlement systems being developed by the New York Stock Exchange, NASDAQ and others, along with recommendations on domestic adoption.
The shift to shorter settlement cycles is fast becoming a global standard. The United States moved most securities transactions from T+2 to T+1 on May 28, 2024. Canada, Mexico and Argentina — where many securities are dual-listed with US markets — acted one day earlier, on May 27, to avoid settlement mismatches and arbitrage risks.
Major European countries are working toward an October next year launch through coordination between the United Kingdom and the EU. In Asia, Hong Kong announced in April that it aims to implement T+1 within the fourth quarter of next year.
Domestic discussions date back to 2023, when the Korea Capital Market Institute conducted a feasibility study on shortening the settlement cycle. Korea Exchange then launched a joint working group with related institutions and industry players in September last year. Korea Exchange also sent a delegation to visit key institutions in the United States and Europe in late April this year, and on May 26 co-hosted the first public forum on the topic together with Korea Securities Depository and the Korea Securities Association.
The decisive push came from the president himself. At a capital market roundtable held at Cheong Wa Dae in March, Lee asked why a stock sold on a Friday only paid out on Sunday, and directed officials to review the system. He subsequently instructed them to examine whether the second-half-of-next-year target was truly necessary.
The Financial Services Commission is set to release a detailed implementation roadmap in October. Korea Exchange is expected to use this consulting engagement, among other efforts, to map out a concrete direction ahead of the FSC's announcement. The Korea Financial Investment Association has already formed a T+1 task force comprising large, mid-size and foreign securities firms.
An industry official said the FSC's October roadmap is expected to contain specific guidelines, after which the TF will begin detailed discussions. The official noted that building the clearing-related IT systems at Korea Securities Depository would be technically demanding, and that the planned extension of trading hours was also in the pipeline — making it an open question whether both initiatives could be pursued simultaneously.
Han A-reum, a senior researcher at the Korea Capital Market Institute, said domestic investors stand to benefit from improved cash management efficiency under a shorter settlement cycle, but warned that offshore investors and cross-border participants could face greater operational burdens due to reduced time for funding and foreign exchange conversion. She said discussions were needed on a range of prerequisites, including securing practical implementation tools, setting a phased scope of application and building a public-private cooperation framework.
Some in the industry view the T+1 debate itself as a transitional concern. As asset tokenization advances, they argue, the very concept of a settlement cycle will become irrelevant. An executive at a securities firm said that in the AI era, traditional assets such as stocks, bonds, beneficiary certificates and funds are being digitized and, through tokenization, will eventually carry 24-hour real-time liquidity. Once tokenization takes hold in earnest, he said, debates over settlement cycle shortening or trading hour extensions may become moot.
Korea Exchange appears to have this trajectory in mind. The consulting scope includes research into the blockchain-based clearing and settlement systems being pursued by the New York Stock Exchange and NASDAQ, along with recommendations on domestic adoption — meaning the contract will address both the near-term T+1 transition design and longer-term research into T+0 real-time settlement within a single engagement.
jiyun@heraldcorp.com
moon@heraldcorp.com
