Key Takeaways:
- The UK Accelerated Settlement Taskforce (AST) is a critical step in the global move to T+1 settlement.
- DTCC’s ITP services, such as CTM and ALERT, will be instrumental in helping firms comply with the expected recommendations and facilitate a smooth transition to T+1.
- As the AST reviews the consultation responses, the financial community eagerly awaits the final report that will outline the path forward for the UK’s transition to a T+1 settlement cycle.
DTCC Connection spoke to Matt Johnson, DTCC Director, Institutional Trade Processing Product Management and Industry Relations, to discuss the UK Accelerated Settlement Taskforce (AST) consultation on the draft recommendation report issued by the AST Technical Group, its significance in the context of the global move to T+1 settlement and how DTCC can assist. The consultation period, which was open from October 1 – 31, provided a platform for market participants to respond to the recommendations put forward by the AST Technical Group around the UK’s move to T+1 settlement.
Related: See how technology can drive global accelerated settlement
DC: Can you explain what the AST Consultation is and why it is important for the industry?
MJ: The AST consultation invited market participants to review and provide feedback on the AST recommendations for a transition to T+1. Comprehensive feedback reflecting the spectrum of industry needs enables the AST, regulators, and policymakers to make informed decisions on whether the recommendations are suitable for the UK market or if further work is needed. This is crucial as it provides an open platform for people to express their views on how the UK should transition to a T+1 settlement cycle. Ultimately, the consultation responses will shape how and when the UK transitions to a T+1 settlement cycle ahead of the proposed 2027 switch.
DC: What is the most important take away from the consultation?
MJ: The most important aspect of the consultation is participation! It is the only mechanism for non-AST members to voice their agreement or concerns with the current recommendations. The consultation acts as an open forum to ensure all institutions active in UK securities trading and investment are given a fair opportunity to be involved. Just as importantly, the consultation will help decide when the UK will move to an accelerated settlement cycle. The UK moving to a T+1 settlement cycle is a significant market event that impacts a vast number of institutions and market participants, so it is imperative that it is implemented in a manner which takes into account the needs of such participants, as well as other factors such as learnings from shortened settlement in other jurisdictions, and consistency, where appropriate.
DC: How can DTCC’s Institutional Trade Processing (ITP) help?
MJ: DTCC’s ITP services, such as CTM and ALERT, can play a pivotal role in how firms comply with the AST recommendations.
We expect the AST recommendations to mandate that all trades are confirmed and allocated on the same day as execution (T0) by the end of 2025, which will be before the actual transition date. CTM provides a fully automated central matching platform that allows buy-side firms to instruct their broker-dealers on how transactions should be allocated or split across managed funds. The faster and more accurately a trade is matched between buyers and sellers, the higher the likelihood it will settle on the intended settlement date.
We also expect the recommendations to call for the use of electronic platforms for SSI storage and communication. ALERT allows firms to digitize their standing settlement instructions (SSIs) and share these SSIs with market participants to understand how and where a trade needs to settle. CTM and ALERT can be used together to enrich SSIs onto CTM trade allocations, allowing firms to lock in economic details and settlement instruction information as part of the trade confirmation and allocation process.
The idea is for the market to begin automating all post-trade lifecycle processes to make T+1 a seamless and successful transition, which ITP can help with.
DC: What are the next steps and where does the UK go from here?
MJ: The consultation was only open for a short period (October 1st to October 31st). Now that it is closed, the AST will begin detailed engagement with institutions such as His Majesty’s Treasury (HMT), the Financial Conduct Authority (FCA), and the Bank of England (BoE) to consider all responses received. This process will likely take 6-8 weeks. Then, a final report will be published by the AST, providing full clarity on when the UK will transition to a T1 settlement cycle, how this will be done, and what institutions investing in UK securities markets will need to adhere to.
In summary, the AST consultation is a critical step in the global move to T+1 settlement. Participation in the consultation is essential for all market participants to ensure their voices are heard. DTCC’s ITP services, such as CTM and ALERT, will be instrumental in helping firms comply with the expected recommendations and facilitate a smooth transition to T1. As the AST reviews the consultation responses, the financial community eagerly awaits the final report that will outline the path forward for the UK’s transition to a T+1 settlement cycle.