by Bari Trontz
In October, The Boston Consulting Group (BCG) will unveil the results of an in-depth cost-benefit analysis that examines the potential impacts of shortening the trade settlement cycle in the U.S. financial markets for equities, corporate and municipal bonds, and unit investment trust trades. Trading in these securities averaged nearly $450 billion per day in 2011.
Over the coming months, DTCC will conduct further outreach to all industry constituents to enlist feedback on the various scenarios the report examines to determine next steps, if any, to be taken. BCG’s business case analysis will identify the obstacles and processes that need to change and the related costs and benefits resulting from a shortened U.S. trade settlement cycle for these securities.
The purpose of the case study is to examine three of the industry’s critical areas of concern: reducing risk, optimizing capital and reducing costs by streamlining processes.
The study will break down the costs, benefits and participant perspectives related to moving the trade settlement from T+3 to either a T+2 or T+1 cycle.
To write its report, BCG interviewed and surveyed market participants – including broker/dealers, investment advisors, custodians and service bureaus – at firms of various sizes across the financial services industry to capture a quantifiable understanding of what would be required in order to accelerate settlement.
Industry feedback on the results of the study will help the industry determine whether to stay at T+3 or change the settlement cycle.@
The DTCC GCF Repo Index is the first – and only – index that tracks the average daily interest rate paid on overnight transactions in the $400 billion daily market for general collateral finance repurchase (GCF Repos®) agreements in U.S. Treasury, federal agency and mortgage-backed securities issued by Fannie Mae and Freddie Mac.Read More