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Frequently Asked Questions

DTCC believes that the time is right to explore a new approach to post-trade processing. Whether that new approach is the adoption of new emerging technologies, or the development of creative new business processes, DTCC believes we can create cost and balance sheet efficiencies for our clients and solidify the U.S. markets as the deepest, broadest and most efficient markets in the world.

  • WHAT ARE THE INDUSTRY BENEFITS OF ACCELERATED SETTLEMENT?

    A: Time to settlement equals counterparty risk, and margin requirements, which are designed to mitigate those risks, represent cost to members. The immediate benefits of moving to a T+1 settlement cycle could mean cost savings, reduced market risk and lower margin requirements.

    Today an average of over $13.4 billion is held in margin every day to manage counterparty default risk in the system. Shortening the settlement cycle would help strike a balance between risk-based margining and reducing procyclical impacts. In one significant finding in the paper, our risk model simulations have shown that the Volatility component of NSCC’s margin could potentially be reduced by 41% by moving to T+1, assuming current processing and without any other changes in client or market behavior.


    UST1 Data

  • WHAT IS MULTILATERAL NETTING AND WHY IS IT SO BENEFICIAL?

    A: One of NSCC’s primary roles in the industry is netting — the automatic process of offsetting a firm’s buy orders for a particular security against its sell orders for that security. Netting consolidates the amounts due from and owed to a firm across all the different securities it has traded to a single net debit or a net credit.

    Allowing trades to “net” settle reduces the total amount of cash and securities that have to go back and forth throughout the day and eliminates a significant amount of operational and market risk. By netting down or reducing the total number of customer trading obligations that require the exchange of money for settlement, NSCC helps to minimize risk and free up trillions of dollars of capital each year. Every day, NSCC netting reduces the value of payments that need to be exchanged by an average of 98-99%.

  • WHY STOP AT T+1 OR T+½? WHY NOT GO TO REAL-TIME SETTLEMENT?

    A: Real-time settlement is a simple technical solution but a very complicated market structure change. While the industry should continue to aspire to real-time, it is more pragmatic to reduce the settlement cycle in stages to capture the benefits faster. With real-time settlement in today’s market structure, the entire industry – clients, brokers, investors – loses the liquidity and risk-mitigating benefit of netting, and that is particularly critical during times of heightened volatility and volume. For example, on a typical trading day, NSCC processes an average of about $1.7 trillion in equities transactions. The multilateral netting process reduces that number by about 98%, and the total value settled is around $38 billion. Netting allows brokerages to transfer that $38 billion between parties only once at the end of the day. In a real-time settlement scenario, netting is not possible and trillions of dollars in cash and securities must move through the financial system on a continual basis throughout the trading day. This creates massive market and capital inefficiencies, increases credit and operational risks, and increases costs between trading parties, possibly undermining the stability of the markets.

    Accelerating settlement requires careful consideration, industry coordination, and a balanced approach so settlement can be achieved as close to the trade as possible (for example, T+1 or T+½), without creating capital inefficiencies and introducing new, unintended market risks, such as eliminating the enormous benefits and cost savings of multilateral netting.

  • WHAT NEEDS TO BE ACCOMPLISHED TO ACCELERATE THE INDUSTRY’S SETTLEMENT CYCLE TO T+1 AND BEYOND?

    A: DTCC is prepared to move quickly to lead the industry to accelerate the settlement cycle to T+1 and beyond. NSCC and DTC already support T+1 and even some same-day settlement using existing technology, though many market participants do not use this option due to market structure complexities, legacy business and operational processes. Many don’t realize, DTC has always been a T+0 settlement platform ever since its inception in 1973 -- even when the industry settled at T+5, T+3 and now T+2.

    As we describe in the paper, in our discussions with the industry, many firms appear ready to start revising their processes to accelerate settlement. They realize it’s in their best interest: shortened settlement times reduce market risk and margin requirements, which would allow firms to use those resources in other ways.

    Equity clearing and settlement is part of a much larger ecosystem of linked financial markets. Accelerating the settlement cycle would have upstream and downstream impacts on other parts of the market structure, including derivatives, securities lending, cash borrowing, foreign exchange and collateral processing, and developing a new accelerated settlement system could fundamentally change current market structure. In order to move to T+1, industry participants must align and implement the necessary operational and business changes, and regulators must be engaged.

  • Why T+1?

    A: The T+1 proposal has been discussed ever since the industry made the move to T+2, but the sense of urgency really comes amid periods of tremendous market volatility over the last several years. A T+1 settlement cycle will significantly increase market efficiency and mitigate market and counterparty risk, particularly during times of extreme volatility. The reduction in risk results in a reduction in margin requirements freeing up member capital.

    A: Accelerating the settlement cycle to T+1 will require industry participants to migrate to more efficient ways of transaction processing including further automation and the adoption of industry standard. In addition to improving each firms individual processing efficient, these improvements have the added benefit of improving the efficient for the entire industry.

    A: The primary benefits of the move to T+1 are risk reduction and operational efficiencies. Studies have been done that show the risk reduction for NSCC activity is approximately $41% of the VaR component of the NSCC margin requirement. This translates into billions or dollars in margin reductions to members. Similar risk reduction exist for buyside firms although those values are more difficult to quantify. Operational efficiencies will be gained by participants adopting industry standard and recommended industry solutions and by improving process flow. The costs associated with the move to T+1 is expected to vary by firm depending on levels of automation and existing business mix.

    A: Accelerating the settlement cycle to T+1 will require industry participants to migrate to more efficient ways of transaction processing including further automation and the adoption of industry standard. This includes improvements that promote STP and reduce transaction fails.

  • Impact on Processing Schedules

    A: 9PM ET will be the new T1 Affirmation cutoff for Institutional and Prime Broker transactions activity.

    A: For T+1, any changes to the OCC Exercise & Assignment process will be communicated to the industry by the OCC. Currently, OCC E & A trades received by NSCC are not guaranteed and processed into CNS until the morning of T+1, after Members have paid their clearing fund. .

    DTCC has been in discussion with the OCC to see if there will be any changes to the timing submission of their E&A transactions to NSCC. Although this process is still being worked through, it is possible this process may not change, and Members should begin preparing internally to settle those transactions in the day cycle on settlement date.

    A: For CNS, after discussion with the IWG and some clients, it was determined the buy-in process will remain a 48-hr. process or two business days. This keeps the CNS Buy-in process in alignment with FINRA Rule 11810

    A: Transactions will need to be approved in RAD prior to the start of the proposed DTC Night Cycle start time of 11:30PM ET.

    A: A Prime Broker disaffirmation in ITP results in them submitting a trade to NSCC in the opposite way of the original affirmed Prime Broker trade.

    At NSCC, this trade is treated just like any other trade submission and will be reported on the applicable CTS Cycle depending upon when ITP submits that disaffirmed trade to NSCC. Members will be apprised of the disaffirmation from the ITP system and its current output that is provided to Members.

    A: No changes to QSR submission process. For T1, it is expected that all QSR's will have their trade submissions and good night messages completed before 9:00 PM EST just like today.

    A: It is too early to be able to answer this question as to when this service will be available.

    A: The T1 Industry Working Group (IWG) thought that there should be no commitment to imposing fail fees in the US marketplace at this time.

    A: The industry move to T+1 will impact netting and liquidity across the industry. The timing of industry netting processes will change. These changes are outlined in the T+1 overview document published in December. The impact of a move to T+1 on liquidity will vary depending on each firm’s induvial transaction mix and existing liquidity procedures. Industry participants are encouraged to carefully review their individual processes and adjust as needed.

  • Corporate Actions

    A: Corporate Actions was discussed in the Corporate Actions T1 session held on May 11. Event replay is available here:

    A: During the industry move from T+3 to T+2, the industry carefully monitored corporate action events around the conversation date and provide guidance were needed. The industry will take a simar approach during the move to T+1. Whether issuers and agents will be able to suppress corporate action events around the conversation date remains to be seen.

  • New Issues / IPOs

    A: Please see the T1 Executive Summary Paper, where this is an extensive section on New Issues and IPOs.

  • Non-U.S. Markets and Clients

    A: Currently, the Canadian market is the only market that has formally announced a move to T+1 in conjunction with the US. A number of other markets are currently exploring a similar move but none have announced any formal plans.

    A: The move to T+1 in the US will require market participants evaluate their processes for supporting international clients and FX. There are a number of existing markets in the US that currently settle T+1, e.g., Fixed income markets. Market participants should evaluate how existing T+1 markets are currently supported and determine what, if any, changes are required to support T+1 in the US equities market.

    A: Each firm will need to determine how best to meet the US trade confirmation requirements.

    A: The move to T+1 in the US will require market participants evaluate their processes for supporting international clients. There are a number of existing markets in the US that currently settle T+1, e.g., Fixed income markets. Market participants should evaluate how existing T+1 markets are currently supported and determine what, if any, changes are required to support T+1 in the US equities market.

    A: There are currently no exceptions proposed for foreign investors. However, foreign investors are encouraged to work with their custodians and service providers to ensure affirmation and confirmation processing is completed by the proposed timelines.

  • Preparing, Testing and Timing

    A: DTCC is uniquely positioned to provide insights that tap into the breadth and depth of our experience. With impactful front-to-back consulting, DTCC can leverage our industry relationships and ability to offer a seamless and positive client experience. For more information about DTCC consulting services, please visit: https://www.dtcc.com/consulting.

    DTCC has started the process of identifying the required changes that will be needed to help our clients and the industry as a whole as we transition to a T1 settlement cycle. These changes have been published in the T1 Executive Summary Paper which can be found at UST1.ORG.

    We have dedicated teams looking at the required changes and their impact to DTCC’s overall ecosystem and its impact to our clients. Teams have been assembled to start the development work on the identified changes and we will utilize an Agile methodology to implement them.

    As far as testing, DTCC is working on a T1 High Level Testing Document -- as we did in the move from T3 to T2 -- that will be presented to the industry ~ Q3 or Q4 of 2022 (subject to change) depending on the final date that is chosen for the move to a T1 settlement cycle. We will distribute this in conjunction with our colleagues at SIFMA and ICI. From there, we will again -- through the Industry Working Group -- have dedicated sessions regarding a DTCC Detailed T1 Testing Document that we are preparing but will require industry input to complete. The timing on that, again, is subject to a final date being chosen for implementation and is still to be determined.

    A: Firms should be engaged and involved with the industry plans for testing. The input of the Industry Working Groups is invaluable as we move together to T+1. We plan to begin preliminary industry testing at the end of 2022.

    A: We believe T+1 is achievable with the right amount of coordination, socialization, planning and testing.

  • Industry Working Groups & the T+1 Playbook

    A: Please see the T1 Executive Summary Paper which was published on 12/1/21. Also be on the lookout for the T1 Implementation Playbook, which will be published later this summer.

    A: No, not at this time. This microsite is in partnership with DTCC, SIFMA and ICI so therefore content is updated by all three organizations.

    A: As we have done for the past year and a half, we utilize the SIFMA, DTCC, and ICI-led working ISC and IWG groups to continue to work with the industry on open issues, timelines, regulatory issues, testing information, hosting Zoom/Webinars to ensure that the industry is engaged at every step as we make the march to the implementation of a T1 settlement cycle.

    In regard to the T1 Implementation Playbook, SIFMA, ICI, DTCC and Deloitte are working together to produce the playbook and have it available for industry consumption sometime in June-Aug 2022 timeframe (subject to change). It will have the same feel of the playbook that was created when the industry moved from T3 to T2.

    Firms should keep an eye on the UST1.ORG website for updates. Please visit UST1.org for all industry documentation, announcements and working papers.

  • Institutional Trade Processing

    A: Based on our data, nearly all Broker confirms are currently received on trade date.

    A: With Match to Instruct, TradeSuite ID confirms are created by CTM on behalf of the Broker and exception processing will be managed in CTM. This will allow the IM to manage the exceptions directly in CTM rather than in TradeSuite ID.

    A: In the industry working group paper published jointly with SIFMA and ICI one of the best practice recommendations is to allocate trades intraday and no later than 7PM EST. While intraday allocations are the goal, we recognize that a large percentage of trades cannot be allocated until market close due to late trading and average price calculations.

    A: ITP’s CTM service is making a change in its security cross reference database and moving to MRD (Master Reference Data) which is the DTC security master which receives multiple intraday feeds to ensure that new issues are available in CTM for trade matching. DTCC’s Security Master Files enrich users' own security master data, creating a reliable, golden source of data and ensuring trades settle on time. Users can leverage trade processing efficiencies through this comprehensive, trusted data set, which describes more than 4 million active securities held at DTCC.

    Because they are the same data used to service the assets eligible at DTCC, clear trades and settle obligations through DTCC subsidiaries, DTCC's Security Master Files enable users to meet critical data quality requirements throughout the life cycle of a security.

    A: There are significant financial incentives related to increased affirmation rates related specifically to a reduction in DK (Don’t Know) and Delivery Order charges. Not only would a decrease in this activity result in cost reduction, but trades that are not affirmed by the current T+1 cutoff are 54 times more likely to DK in RAD and create significant back-office costs related to manual exception management.

    A: The adoption of an M2i workflow has kicked into high gear as the focus on achieving T+1 increases. Last year, DTCC and the industry were primarily focused on migrating all U.S. volume from OASYS to CTM which was a pre-requisite. With the OASYS migration now complete, and with a new focus on increasing efficiencies in the face of T+1, many Tier 1 Brokers are kicking off projects to integrate the workflow and we expect to achieve critical mass in 2022.

    A: Currently the disaffirmation cutoff for T2 confirms for a client to send a disaffirmation is on settlement date -1 at 5:00pm. For T1 the cutoff is changing to settlement date at 5:00 pm.

    A: The stat Sean referenced in our recent virtual event is 0.07% of affirmed trades that DK in the RAD process as opposed to 3.8% of unaffirmed trades. That is for all DTC eligible securities including fixed income.

    A: TradeSuite ID functionality is effectively being integrated into CTM with its M2i workflow, though we continue to leverage TradeSuite ID for connectivity to the full community. At this time, there is no timeline for the retirement of TradeSuite ID.

    A: We do expect that T1 and the same day affirmation requirement will require operational changes. We are also looking at new technologies (e.g. chat) to facilitate more timely and efficient communications and exception resolution.

    A: We are not aware of any penalty proposals currently.

    A: Our data shows that nearly all confirmations are submitted to TradeSuite ID on T today. The regulation will obviously require behavioral change to submit these confirms several hours earlier to facilitate matching and affirmation prior to 9pm. We believe that CTM’s M2i workflow is well positioned to make this possible.

    A: We believe that T1 is achievable leveraging existing technologies available today and already in use, but we are constantly looking at new technologies as well.





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