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2024: The Big Market Structure Themes

By Timothy Keady, DTCC Managing Director, Chief Client Officer | 4 minute read | January 23, 2024

2024 will be a significant year for financial services market structure and our clients. Here’s what I believe will be four dominant themes for the year ahead.

The first area of focus will be the U.S. move to T+1 on May 28, 2024. This change in market practice will require the buy- and sell-side to ensure they have efficient post-trade pre-settlement processes in place to meet the new settlement deadline. While firms should now be focused on ensuring they have post-trade automation to meet an accelerated settlement cycle, they must also plan for what should come following implementation. Once T+1 is a reality, all is not done. Firms should conduct regular assessments of how they are performing as it relates to T+1 to see if there are changes required to their processes, internally or externally, to ensure compliance with the shortened settlement cycle. There may be considerable adjustments to post-trade processing systems after the deadline and in the months that follow as the industry continues to adjust to the new rules. This applies not only in the US but also to impacted market participants in Europe and Asia, who have the complexity of time zone differences to contend with as well.

Centralized matching platforms like CTM will become increasingly critical, providing seamless connectivity from trade execution to settlement as well as access to a global community. At the same time, outsourcing will become even more important because buy-side firms that have not invested in middle and back-office automation will need to outsource these functions to meet T+1 timelines. For the buy-side, adopting automated SSI solutions, either via an outsourcer or directly, will be a crucial part of preparing for and navigating compliance with T+1 as it ensures accurate settlement instructions which reduces the chances of errors.

Related: How ITP is supporting accelerated settlement across the globe

The second key theme, and a topic I have highlighted throughout 2023, is the increasingly crucial role of data. The large-scale progress the industry has seen in data management in recent years is largely driven by the development of cloud-based tools, which has enabled new data insights and a more efficient roll-out of new business processes. While I expect this theme to continue in 2024, I believe it will evolve to focus more on data warehousing and the role of APIs. In a recent panel I participated in, banks confirmed that a critical piece for them going forward is how they can get their data back ‘sooner, quicker, faster’. This can be achieved through data warehouses, which contain multiple disparate data systems that, through APIs, feed data into modernized platforms in near real time.

An example of this is the recently launched Trade Reporting Analytics and UTI Exchange, part of DTCC’s Report Hub service. The analytics tool enables the evaluation of trade and transaction data for accuracy, completeness, and timeliness across derivatives trade reporting regimes. Meanwhile, the new UTI Exchange, delivered by API, supports the exchange of UTIs by counterparties as required by most major derivatives regulatory reporting regimes under existing rules and upcoming rules rewrites.

This brings me to the third key theme of 2024: the forthcoming trade reporting regulatory rewrites. This year, we’re expecting phase 2 of the CFTC rewrite in Q1, the Financial Services Agency of Japan (JFSA) Rewrite and the EU EMIR Refit in April 2024, and the UK EMIR Refit in Q3 2024. Market participants should prepare for these new rules by leveraging automated tools like Trade Reporting Analytics and UTI Exchange, which have been specifically designed to help navigate these regulatory changes.

Related: Regulatory mandates impacting firms in 2024

The fourth and final market structure theme for the coming year will be the SEC’s recently issued rule amendments around its 2022 expanded U.S. treasury clearing proposal. DTCC believes the adoption of an expanded centralized clearing model for U.S. treasuries will reduce risk and enhance resiliency, improving the strength and stability of the entire U.S. economy. We are prepared for this significant undertaking and will continue to evolve our access models and enhance capital efficiency whenever possible to effectively support our clients. We are also committed to facilitating industry discussions and will continue to provide education and leadership around this important topic, as we work together towards a successful implementation.

Related: DTCC Comments on SEC ruling around expanded U.S. Treasury clearing

In summary, 2024 will be a significant year both from a technology and regulatory standpoint. In terms of technology, data warehousing and APIs will be significant themes. From a regulatory perspective, the implementation of T+1, derivatives trade reporting regulatory rewrites, and the expansion of central clearing requirements for US Treasuries will dominate headlines and firm agendas. DTCC remains committed to working alongside all of our stakeholders to ensure the smooth transition to new market practices.