Talks to introduce a "T+1 settlement cycle," under which money is received the day after selling stocks, are gaining momentum. As financial authorities push system improvements along with extended trading hours, Korea Securities Depository (KSD) and Korea Exchange (KRX) also plan to hold a series of related meetings at the end of this month and in Apr. to assess the current situation and discuss fixes.
However, structural constraints such as settlement time gaps for foreign investors and the foreign-exchange conversion system remain, and the industry expects adoption around 2028 in light of the global trend.
President Lee Jae-myung on the 18th noted the need for system improvements at a meeting on stabilizing and normalizing the capital market held at the Blue House, saying, "Why is it that stocks are sold today but the money comes in the day after tomorrow?"
Currently, it takes two business days (T+2) for funds to be deposited into an account after a stock trade. Financial authorities are pursuing a plan to shorten this to one business day (T+1), the standard in advanced markets such as the United States and Canada, and related institutions including Korea Exchange (KRX) and Korea Securities Depository (KSD) have been continuing working-level discussions through a working group formed last year.
If the settlement cycle is shortened by a day, open-settlement risk decreases, easing margin burdens and lowering the chance of settlement failure. Above all, investors' cash turnover (liquidity) would improve, and liquidity across the market is expected to expand.
Industry participants, however, point to the transaction structure of foreign investors as the biggest hurdle. Foreign investors operate in a multilayered structure, settling at the depository via domestic standing agents after going through overseas asset managers and brokers. Following trade execution, steps such as account-by-account allocation, foreign-exchange conversion, and fund transfers must be completed, inevitably taking time.
Time-zone differences are also a burden. If the settlement cycle is shortened, major investing countries such as the United States would see sharply reduced preparation time for settlement, which could dampen foreign investment. That is because T+1 settlement on a Korea basis effectively works like same-day processing (T+0) for U.S. investors. If a U.S. investor trades overnight, all steps including FX conversion and fund transfers must be completed within business hours the following day. In addition, the expense and staffing burdens from system upgrades and regulatory changes at related institutions such as the depository and securities firms must be addressed.
For these reasons, major Asian markets including Korea, Japan, and Hong Kong are still maintaining a T+2 framework. In particular, because foreign investors often manage funds across Asian markets as a group, some note that shortening the settlement cycle in only certain countries could create confusion in fund operations. In fact, during last year's working-group discussions, foreign institutions were said to have conveyed the need to align the timing of settlement-day reductions among major Asian countries.
Still, the prevailing view is that shortening the settlement cycle is inevitable given the global trend. With Europe and the United Kingdom pushing to switch to T+1 by Oct. 2027, there is a view that Korea will adopt it by the end of 2028 at the latest.
Korea Exchange Chair Jung Eun-bo also said at the Blue House meeting that day, "We will closely monitor international trends in payment and settlement and will absolutely not be late," adding, "We will prepare so that clearing and settlement can take place preemptively."
In practice, the depository plans to review tasks needed for shortening the settlement date through a related-agency meeting at the end of this month, and the exchange plans to continue discussions on on-exchange settlement systems in Apr..
An exchange official said, "In the United States, the Securities and Exchange Commission (SEC) played a major role in driving the shift to T+1," adding, "Government-level leadership is needed to enhance market efficiency rather than to impose regulation."