As DTCC prepares for the move to accelerated settlement, from two days to one day (referred to as T+1) for equity products, modernizing technology, along with maintaining a robust control environment, remains top of mind.
“T+1 is really a microcosm of everything we're doing within IT at DTCC to ensure we have modern, secure, resilient, state-of-the-art systems. The incredible work being done at DTCC really typifies the collaboration across the industry,” said Karen Duffy, Managing Director of IT SIFMU and Risk Delivery at DTCC.
Related: How ready are you for T+1?
DTCC Connection caught up with Duffy and Behar Cami, DTCC Managing Director, ITP, RDS and Data Services (IRD), to understand how firms upgraded their technology in response to accelerated settlement initiatives in the past and how DTCC is supporting both clients and the financial services industry in the landmark move to T+1.
DC: When settlement moved from T+3 to T+2 in 2017, how did firms prepare for this change from a technology standpoint, and what are some of the lessons learned?
KD: From a client engagement perspective the preparation for the 2017 effort was very similar to those for the move to T+1; there was a lot of coordination and collaboration between DTCC, the industry and our clients every step of the way. Each firm’s story is unique in terms of the work that they do, their bespoke systems that have been built over time and how they connect with DTCC.
Karen Duffy, DTCC Managing Director, IT SIFMU and Risk Delivery
Each firm was on their own individual journey to evolve their technology and systems that talk to DTCC, to ensure they could fully support a compressed settlement cycle. From a holistic perspective, there was a lot of work done to confirm that we can come together as industry participants in support of the move to T+2. Testing and validating use cases, as well as testing continued connectivity to DTCC, were paramount in ensuring organizational health and readiness for the implementation date.
However, the technology landscape has changed significantly since 2017, and our internal preparation is heavily focused on ensuring we have the right automation and observability capabilities are in place at DTCC as we move toward T+1.
Behar Cami, DTCC Managing Director, ITP RDS and Data Services (IRD)
BC: While there are several similarities between the move from T+3 to T+2 and the upcoming shift to T+1, from a broader industry perspective, it’s worth noting that this change is more significant in that the continued settlement acceleration requires higher levels of straight through processing and automation. As such, all firms need to evaluate their processes end-to-end and identify any processes that require streamlining and automation as the window for recovery is tightened.
As with the move to T+2, there is heightened focus end-to-end evaluation, scenario planning, a high focus on resiliency as well as the need for comprehensive industry testing to assess and prove readiness. As the nature of settlement requires several client and partner interaction points, the focus on industry testing and validation is absolutely critical.
Related Podcast: The Intersection of Technology & ITP
DC: With the go-live date of May 28, 2024 for the move to T+1, what key technology improvements and capabilities can financial services firms focus on over the next 12 months to best prepare for the move to an accelerated settlement cycle?
KD: It’s very important that firms are prepared for industry testing efforts – both in terms of timing and taking full advantage of testing system readiness. Firms can test their interfaces with DTCC to ensure timely and thorough test preparedness. Importantly, I would urge firms to focus on resilience.
When moving to this compressed timeframe for settlement, resiliency is at the forefront. Having the capability to respond, address, and remediate any issue in a system, as well as recover in a timely manner, is very important. Firms should also understand how the settlement cut off times have changed with respect to DTCC, and ensure they are able to shift their schedules to meet the new timeframes that we have published.
BC: A thorough analysis to understand the regulations and accelerated timings, as well as to understand the impact to settlement processes and systems, is imperative to identify the areas of focus to support the accelerated settlement cycle. As the recovery window to address exceptions or outages is reduced, resiliency and recoverability should remain a top priority.
Although the go-live for T+1 is May 2024, industry testing is scheduled for Q3 of this year, and thus the window of addressing gaps is condensed. Due to DTCC’s role in the industry, resiliency is a core capability and focus area, and T+1 readiness has been an active program for well over a year.
DC: How is DTCC utilizing new technologies and automation to support the move to T+1, while ensuring security and resiliency for clients?
KD: We have automation built into both our testing and preventative controls. As detailed in our 2022 white paper, The Power of Technology Resilience, we take a resilience-first mindset at DTCC, and build resilience principles and concepts into the foundation of our platforms and applications. We have so many more capabilities available to help make our applications and our platforms more secure. These include things such as: observability, dashboarding, extensive readiness assessments to ensure we are able to support and operate under compressed timeframes, and enhanced communication, giving us the ability to respond to any issues quickly.
So much has changed since 2017, in terms of the industry and DTCC’s own technology landscape. The move to T+2 was very successful, and today, we have an even richer and more mature environment in terms of resiliency and security, which are key as we prepare to support T+1 settlement.
BC: Resiliency is a key, foundational capability for DTCC. Ensuring that our platforms can scale, be resilient and recover is a key tenet of our application design and architecture.
DTCC has strategically invested in both private and public cloud architecture patterns and technologies, while focusing heavily on network modernization, automation and observability to provide continued security and resiliency. This focus goes beyond just technology, and extends to appropriate policies, procedures, monitoring and alerting to ensure we are prepared to fully support our clients and the industry in the move to accelerated settlement.