Some people see the T+1 settlement cycle as a double-edged sword—while it brings substantive value to industry participants, such as higher liquidity, it exerts immense pressure on firms’ capabilities to successfully deliver manual trade delivery instructions to various market participants. For buy-side firms in the APAC region, time-zone differences will leave your middle and back office with a compressed timeframe for post-trade processing.
For mature markets with vast trading volumes into the US, like Singapore, Hong Kong, Japan and Australia, they are likely to feel the squeeze more. Are APAC firms ready to beat the steep learning curve before the US T+1 comes into effect in May 2024?
With experiences learned over the years through the implementation of various regulations, we would recommend buy-side firms to focus on three main areas.
Firms may experience many impacts resulting from the switch to T+1, including:
Timing of allocation delivery
Matching and affirmation
Trade notifications to custodians/PBs
Securities lending workflow
FX and local currency funding
Fund share redemption cycle
Local staff coverage
Settlement disconnect for ETFs/ADRs
To assess whether your firm is sufficiently prepared to navigate the shift to the T+1 settlement cycle, we recommend you evaluate:
Reviewing electronic order routing readiness
Real-time finalization of trade allocations
Frequent trade file delivery to middle and back office platforms and third-party service providers
Review of post-trade compliance workflow
Review of matching tolerances
Assignment of DTCC Institution ID
Review of T+1 matching scorecard
Utilizing technologies to automate manual processes
Next-generation technologies like artificial intelligence, intelligent automation and digital workers can help you adjust your processes to accommodate the T+1 settlement cycle. These technologies can improve:
Implementation of automated matching and allocation delivery.
Electronic storage of Settlement Instructions (SSIs).
Monitoring of matching and settlement exceptions across executing and clearing counterparties.
Examine other front and middle workflows for potential bottlenecks.
Ensure proper staffing to ensure trade booking exceptions are handled on the trade date.