[ S E T T L E M E N T ]
ered a breadth of market participants from custodians to fund managers , gathering the views of 287 organisations across the world on their readiness for the US ’ shift to T + 1 . Its results are revealing . When the survey was published , less than half of respondents expected to be ready by May 2024 , while 41 % of the market still hadn ’ t begun planning for T + 1 , and if you look at the buy-side in isolation , this number rose to 61 %. The ValueExchange also found that two-thirds of the market was struggling to resource T + 1 projects , 13 % of investors said they wouldn ’ t be ready until at least September 2024 and 31 % didn ’ t know when they would be adequately prepared .
Accelerating automation Let ’ s start with the age-old issue of manual processes in the back-office , something that will come even more to the fore with the shortened settlement cycle and a compressed post-trade processing time . Recent research conducted by Firebrand Research and licensed by Torstone Technology found that 81 % of brokers and banks active within the US and Canadian markets are either using some level of manual processes or home-grown systems to support their post-trade processes . “ Manual processes and batch processing are simply not compatible with the shift to a shorter settlement cycle – firms need to update and automate their middle- and back-office systems or face substantial operational risk ,” explains Mack Gill , chief operating officer of Torstone . If market volatility over the past few years hasn ’ t already sparked the initiative to move away from manual processes , then a shortened settlement cycle will . Automating allocations , confirmations and affirmations has to be a priority now as the concept evolves from a ‘ nice-to-have ’ to a ‘ necessity ’. This is because trades will have to be affirmed by 9pm on the trade date under T + 1 . According to analysis by State Street of DTCC data for June 2022 , nearly 15 % of trades were delivered the day after the trade date , meaning they would have failed under the new regime . For any firms that don ’ t have the necessary levels of automation in place , it ’ s likely that much of the planning and efforts to prepare for T + 1 will go into – or at least should go into – automating these processes as market participants ensure affirmations , confirmations and allocations take place as soon as is technically practicable to ensure that settlement happens the next day . “ It ’ s not like CSDR [ in Europe ] where nothing ’ s going to kick-in until that day , you can take very concrete action right now to start driving down fail rates and
12 Securities Review Q3 2023