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Settlement Optimization Update Night Cycle Reengineering

By John Abel, DTCC Executive Director, Settlement Services | April 2, 2019

Turning User Feedback Into Improved Market Insights
John Abel, DTCC Executive Director, Clearance & Settlement

Last year, we released a white paper, Modernizing the U.S. Equity Post-Trade Infrastructure, presenting two innovative proposals — settlement optimization and accelerated settlement – which would enable clients to improve workflows, optimize capital and reduce risk, further enhancing settlement processing efficiencies through automation.


Ultimately, the goal of settlement optimization is to improve clearing and settlement processing efficiency, which would promote settlement finality, while still preserving the resiliency of the current infrastructure. In order to achieve this alternate model, we approached the problem in new ways, determining how to best modify components of our core settlement system.


For the past year, we’ve worked specifically on the component of settlement optimization referred to in the white paper as “Night Cycle Reengineering”, as this component of the proposal was determined to be foundational to the other components of settlement optimization. Designed to maximize transaction throughput by optimizing client available position and controlling the order in which transactions are attempted for settlement within existing night cycle timeframes, Night Cycle Reengineering also creates several industry benefits:


  1. Improved processing efficiency
  2. Reduced operational risk
  3. Improved intraday settlement finality   


With input from the industry, we have recently refined the processing rules for the reengineered night cycle.  While these changes have minimized some of the anticipated benefits related to Night Cycle Reengineering, they have gotten us to the point where Night Cycle Reengineering can be implemented with very little, if any, development work from clients.  


DTCC has developed a simulation engine capable of comparing production and simulated settlement rates. Although individual client results vary, the simulations consistently show an overall industry-wide improvement in night cycle settlement rates of 15% or more, representing an additional 75,000 transactions being settled during the night cycle. 


In addition to improved settlement rates, Night Cycle Reengineering also results in less transaction processing at DTC which should translate into a savings of approximately $3.5 million per year for members.  Night Cycle Reengineering also allows us to now incorporate additional transactions into the night cycle – transactions that we previously couldn’t include because of timing limitations of the night cycle.


We are encouraged by the progress to date, and especially the active input and collaboration with clients that has gotten us this far. We intend to publish a more definitive timeline shortly as we continue toward our Q3 2019 target for Night Cycle Reengineering.


To help stay up to date with Night Cycle Reengineering and other related news and information, clients are encouraged to visit our Settlement Optimization page on DTCC Learning:


If you have any questions on our Settlement Optimization efforts, please send an email to [email protected] or contact your Relationship Manager.