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Accelerating to T+1: Global Buy-Side Perspectives

By DTCC Connection Staff | 4 minute read | February 8, 2023

The U.S. Securities and Exchange Commission (SEC) has submitted rule changes to accelerate the settlement cycle to T+1 in 2024. The final ruling on the go-live date from the SEC is expected before the end of Q1 2023. While the implementation date for T+1 remains in flux as the industry awaits guidance from the SEC, everyone should be continuing to prepare for the proposed changes. 

Global industry leaders joined the first installment of this year’s "Accelerating to T+1" series to focus on the global buy-side perspectives.

Related: DTCC Ramps Up Industry T+1 Testing

Below are highlights from the discussion:

Global Perspective

With so many moving pieces, the move to T+1 will have many implications, particularly for global firms. But the U.S. will not be the first to move to a T+1 settlement — China already operates on a T+1 settlement, and India completed its move on Jan. 27. 

While firms will benefit from India’s recent migration, concerns loom large in Asia regarding the move in the US, where the time to process will be severely compressed. Trade matching will need to be completed on trade date and exceptions will need to be streamlined and resolved by T+1 at the latest.  

Rule makers in both the UK and EU are examining the potential of T+1 settlement for their respective markets, but the complexity of the European capital markets, including the number of impacted Financial Market Infrastructures (FMIs), CSDR cash penalties and pending buy-in issues, makes it unlikely that these markets will immediately follow suit.

Time Zone Challenges

The removal of 24-hours from the trade cycle will have a substantial impact on all firms, particularly global firms. With even less time to settle trades, global firms are concentrating on several time zone related challenges:

  • Investing in North American onsite personnel to handle trade and settlement issues in real-time.
  • Coordinating with custodians as they also will need to provide coverage in U.S. time zones. 
  • Managing the new compressed processing schedules related to the move to T+1.
  • Focusing on securities lending and foreign exchange (FX) processes.

Adapting to Change

A successful migration will involve both operational and behavioral changes as well as implementation of technological innovations. Changes are needed throughout the trade lifecycle to further automate many processes that are still manual as the shortened settlement cycle highlights the importance of straight-through processing to avoid delays.

DTCC will continue to work closely with the industry to develop additional solutions to help with the move to T+1, such as assistance with the potential new record retention rule expected to come once the SEC finalizes the proposed ruling.

  • To accelerate settlement, post-trade agreement and affirmation need to happen faster. This is achieved through increased automation in the allocation, confirmation, and affirmation processes. DTCC’s CTM Match to Instruct (M2i) workflow with ALERT enrichment streamlines institutional trade processing and facilitates timely trade agreement and affirmation. 

  • Firms will also need to explore any misalignments and how operations and technology can be adjusted or enhanced prior to the move to T+1. ITP Data Analytics provides analytics tools enabling clients to measure and compare their operational performance against counterparties, industry standards and peers, with dedicated metrics and analyses on data points that can assist in preparation for the proposed move to a U.S. T+1 settlement cycle. 

More Information

DTCC recently issued a new, comprehensive document to help clients prepare for the transition to an accelerated settlement cycle in 2024. This latest document issued in mid-January, T+1 Test Approach: Detailed Testing Framework, provides a deeper level of detail so firms can now prepare for testing T+1 changes with DTCC and other industry infrastructures. 

From regulatory uncertainty to reimagining existing technology and operating models – notably securities lending and FX processes, plus potential new record retention requirements, buy-side firms may face challenges on the path to T+1.

“If you haven’t started your T+1 impact assessment yet, you are now late,” cautioned David Kirby, DTCC Executive Director, Head of Americas Relationship Management, who has been moderating the virtual series of webinars, “But our experts can get you back on track. We’ve already started helping clients from across the buy- and sell-side assess their front to back securities workflows and optimize their global operating models through DTCC Consulting Services.”

View for all news, documentation, to register for the “Accelerating to T+1” virtual event series and information related to the industry's effort to accelerate the U.S. securities settlement cycle.