The Securities Exchange Commission (SEC) is set to shorten the settlement cycle for US securities markets next spring from T+2 to T+1. In the international context, any party trading in the US—irrespective of domicile—and transacting in relevant instruments will be impacted by the change. The shift to a T+1 settlement cycle is intended to reduce risk during periods of high volume and volatility, which has occurred more frequently in recent years, as well as to enhance capital and operational efficiencies in global markets. Beyond the US, other countries have announced their own plans to shift to T+1, like Canada, Mexico. India made the shift last year and together with China, the two biggest economies in APAC are now on a T+0/T+1 settlement cycle
For non-US buy-side firms trading in the US, compliance to T+1 will likely mean finalizing transactions, including allocations by their local end of day to allow for exceptions to be resolved. These firms should consider outsourcing post-trade processes to a service provider, as the manual processes for counterparty matching and SSI management can be an impediment to meeting the shortened timeframe. Outsourcing middle-office tasks can significantly increase automation which ensures efficient and accurate delivery of data to custodians and prime brokers for settlement. Many APAC firms are highly dependent on their brokers and custodians to ensure their compliance with the US T+1 settlement cycle. Investment managers will need to meet stringent investment management recordkeeping obligations in order to provide the SEC with archival evidence of meeting the T+1 timeframe. This is another area that can be more effectively managed with a trusted outsourcer.
SS&C is here to help you conform to the T+1 settlement cycle, with a variety of resources, solutions and outsourcing services. Download our "T+1 Settlement Frequently Asked Questions" to learn more about the impact the T+1 settlement cycle will have, and how to adhere to the new market requirements and best practices.