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Three quarters of firms anticipate ‘ major impact ’ from T + 1 , Citi study finds
Accelerated settlement is the largest area of focus for financial market infrastructures ( FMIs ) and market participants globally , with 77 % expecting a major impact on their business . This is according to a study by Citi , which gathered information and data from 12 FMIs and almost 500 market participants , including banks , broker-dealers , asset managers , custodians and institutional investors globally . The study , the third edition of Citi ’ s Securities Services Evolution , found that while the impact of acceleration remains the primary focus , a consensus is also emerging as to how best to prepare for it . Participants are initially focusing on clients and counterparties ; followed by in-house platforms and processes ; and evaluating staffing and location strategies . The research revealed that 69 % of those surveyed are focused on automating and
Research reveals an emerging consensus on how best to prepare for accelerated settlement .
standardising client communications , while 64 % are looking to upgrade / replace technology platforms . Charlie Geffen , a member of the UK Accelerated Settlement Task Force , noted : “ As settlement times have accelerated , the legacy systems and processes have come under increasing pressure . It is clear that post-trade frictional costs are too high and a move to T + 1 will provide a catalyst for the significant investment and change that will be required .” When assessing the greatest obstacles to achieving reductions in the global settlement cycle , cash , funding and liquidity management were cited as the leading hindrances . While regulatory pressures and the need for clarity around rules has been steadily addressed , funding remains a core challenge . Legacy technology remains the key challenge for 15 % of respondents . Regarding the technology critical for a smooth transition to a shortened settlement cycle , AI / machine learning ( 60 %), cloud ( 54 %), and the upgrade of existing infrastructures ( 53 %) were cited as the most important . The research points out that AI can identify data quality problems , remedy payment issues or manual errors and eliminate manual touch points and automate reconciliations . AI has also been used in collateral management to provide predictions on price , risk and liquidity . “ As market infrastructures continue to evolve , it ’ s increasingly important for industry participants to work in partnership to strengthen the stability of the overall ecosystem ,” said Matthew Bax , global head of custody for securities services at Citi . “ Supporting innovation while maximising global consistency of the client experience remains core to our Securities Services offering .” Looking ahead , 89 % of the market now expects a move away from T + 2 in the next five years across major markets . And beyond T + 1 , there is a growing belief that atomic settlement will become a core part of the market in 15 years ’ time , with 27 % expecting this mode to become the prevailing timeframe for their major markets by then .
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