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it ’ s a heavy enough lift from European firms to contend with the US transition . While we haven ’ t gone over the benefits of T + 1 settlement again in this feature ( much like the rest of the industry we do tend to dwell on the challenges ) there is the bottom line of : shorter settlement times reduce risk – at least long-term and once everyone has adapted . The move for Europe would also bring a much-needed prompt for automation and alignment with the US - so there are definitely calls for Europe to hurry its evaluation and establishing of a timeline . But it would also make sense for the EU to co-ordinate with the UK and Switzerland also . As for the action which has taken place to this point , in March the Association for Financial Markets in Europe ( AFME ) established an industry taskforce to assess two key questions : firstly , whether Europe should follow the US in the move to T + 1 , and secondly , if so , how and when the potential move should happen . The association is calling for participation from a broad range of industry participants who would be impacted by the shortening of the settlement cycle .
Brexit gives UK independence of pace The UK - now unbeholden to the rest of Europe due to a political decision not for debate in this publication - has started its own journey through a taskforce established at the end of 2022 . Given a year to report back , the group - made up of familiar industry experts - was tasked with submitting full report and recommendations by December 2024 – though Global Custodian understands this could be delivered earlier than expected , possibly around Q3 time . Industry chatter also suggests that the UK is likely to transition to T + 1 before the rest of Europe , partly because of independence and less complexity , but also to continue to boost the reputation of the UK in the financial markets post-Brexit . “ It is important that the UK also considers whether accelerated settlement would be beneficial , what challenges it would pose and how it could be implemented in the UK ,” the UK government said in a statement . “ This includes a potential move to a new standard T + 1 settlement period and any other future developments to the settlement cycle , such as ‘ T + 0 ’, or the use of distributed ledger technology . An exploration of these potential developments will also need to include an assessment of whether the UK ’ s settlement discipline and efficiency arrangements are currently performing effectively and are suitable for accelerated settlement , as this will be an important factor in determining the success of any acceleration of the settlement cycle .” The accelerated settlement topic forms part of the UK government ’ s Edinburgh Reforms , which seek to drive growth and competitiveness in the financial services sector . Writing for Global Custodian earlier this month , Virginie O ’ Shea , founder and CEO of Firebrand Research urged the taskforce and the UK not to rush the decision . “ One of the challenges for the group is gathering the views of the wider industry and not just those of a select group of individuals ,” she explained . “ The ageold problem of industry associations and working groups alike is that smaller firms tend not to be able to participate . The firms with small teams of individuals that are struggling to support business as usual from a day-to-day operations perspective are those that will likely be impacted the most , but are often the least engaged . They have scant time to do their day job and therefore don ’ t have the time or the resources to even reply to direct outreach . “ Ensuring that there is wide representation and , even if it isn ’ t direct participation , the views of smaller firms are balanced alongside those with regulatory engagement teams and the resources to make their voices heard is important . What might seem like expensive but relatively plain sailing from an implementation perspective for one firm , might be a complete nightmare for another . If the UK government is keen for its smaller homegrown banks , brokers and asset managers to keep up with the market in Europe and not be put at a disadvantage , then it needs to listen to this feedback .”
Asia Pacific Amid all the talk of the US transition , we seem to have taken it for granted that India has made the transition to T + 1 , with – what it reports – as a degree of success . Through its phased approach , the market managed to recover from what some suggested might have been a rushed approach when the initiative was first announced . The implementation began in February
2022 , when the bottom 100 stocks by market cap made the switch – with an increasing number of stocks transitioning throughout the year . The implementation concluded on 27 January 2023 , with the entire market of 5,500 scrips now settling on a T + 1 basis . Speaking to Global Custodian earlier this year , Viraj Kulkarni , securities services stalwart in the Indian market and GC Legend , said : “ Kudos to the India infrastructure institutions , especially the clearing corporations , banks , custodians and broking firms , in ensuring the
16 Global Custodian Sibos Special 2023