AI Regulation, T+1 and the Fixed Income Agenda
Regulation is extending further into AI, transparency and market infrastructure, and settlement cycles are about to shorten. Against that backdrop, fixed income leaders have made liquidity management their leading strategic priority.
These are among the findings of The FILS Europe Playbook, for which Fixed Income Leaders Insights surveyed 100 senior fixed income professionals from asset managers, hedge funds and private banks across Europe.
Regulation turns to AI
Leaders expect these regulatory developments to have the greatest impact on fixed income markets over the next three years:
- AI regulation (25%)
- Market transparency reforms (20%)
- T+1 settlement (18%)
On AI, Europe is headed in a clear direction. ESMA has confirmed that existing MiFID II rules, including acting in clients’ best interests, apply to AI, and the EU has agreed to delay the AI Act’s high-risk rules to December 2027.
A gap in readiness
31% see governance and regulation as a barrier to AI, but only 16% worry about explainability. According to the report, this is the issue regulators are most likely to question when AI is used in execution.
“Buy-side trading is a heavily regulated function, and best execution is all about the best outcomes for clients. We have a huge fiduciary responsibility.”
Lars Salmon, Head of Fixed Income Trading, Fidelity
T+1 is the most immediate change
The EU, UK and Switzerland move to T+1 settlement on 11 October 2027. This gives bond desks less time after each trade, and makes work on automation and data more urgent.
Liquidity management leads a divided agenda
The industry does not have a single dominant priority, but improving liquidity management leads (21%), just ahead of extending into new asset classes (17%).
What stands out is how leaders think about liquidity. Only 19% see market liquidity as a key macro factor, and just 6% name it as the defining challenge of 2030, yet it is the top priority for the next two years. Leaders treat liquidity as something to manage day to day rather than something to forecast, using better tools and a wider range of instruments, from ETFs and portfolio trading to credit and bond index futures.
“Improving liquidity management is definitely a priority for us, and that includes branching out into other instruments and products that help us manage liquidity.”
Lars Salmon, Head of Fixed Income Trading, Fidelity
Liquidity under stress
Looking ahead to 2030, respondents’ concern is less about normal trading conditions and more about what happens when many investors need liquidity at the same time. As one put it: “The real test will be whether you can exit a position when everyone else is trying to do the same thing.”
The FILS Europe Playbook explores regulation and strategic priorities in more depth, alongside liquidity, market structure and data infrastructure.