Settlement Initiation T+1 Forum Roundtable Summary & Recommendations

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Settlement Initiation T+1 Forum Roundtable Summary & Recommendations

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T+1 Forum Event hosted by EY

Settlement initiation

Settlement Initiation T+1 Forum Round Table Summary & Recommendations


In this ISITC Europe T+1 Forum round table session, kindly hosted by EY on the 11th October, 2023. Industry leaders from both buy and sell side discussed how T+1 will impact settlement initiation, including affirmations and allocations. This was the first in a series of micro market roundtables, being held over the coming months, to elicit opinions from the market and discuss how challenges can be resolved in the run up to the North American move to T+1 in May next year.

This post-event summary details how the current settlement initiation process will be impacted and how each market participant can support each other best through this transition. The importance of the need for open conversations in the market, to share opinions and challenges, cross-industry to ensure the industry as a whole can seamlessly transition to T+1, was reiterated both at the start and end of the discussions.

There was a strong consensus by those present that there is good communication with both small and large firms, regarding the transition to T+1. However, challenges for small firms were identified, including cost pressures, lack of specialists, and lack of capacity to make headway on their transition to T+1.

It was noted that many participants thought that this change could be a catalyst for smaller firms to consider introducing technology solutions to assist them to make this transition and to make the business more efficient. A number made the point that adopting new platforms, was more cost-effective than is generally thought.

Many of the larger firms in the room shared that they have already begun running T+1 simulations in the run up to the transition and assessing their processes against the T+1 confirmation and affirmation timelines. There was agreement that testing of  T+1 transition programmes needs to be made mandatory and be held with all parties in the chain, including buy side, custodians, and counterparties to ensure a smooth transition, although it was recognised that this would be very difficult to actually organise.

A number of the participant firms have begun reaching out to their client base to support them through this transition. It was agreed that it is important that firms should be making data-driven decisions regarding how they can ensure a seamless transition to T+1, for example are there specific markets or flows which are allocated late? It was agreed that collaboration is key in making this work for all concerned.

Challenges facing brokers were identified as; issues with reference data, a lack of discipline on SSI’s and a lack of recoverability.

Inventory management was also another important area for firms to consider, although the room agreed that this has been an ongoing issue for some time.

Another topic broached was the imbalance in fines, primarily affecting the sell side. However, consensus in the room was that, in reality, the broker and client need to work collaboratively to meet T+1 and instead of fines, the broker needs to support the client through the transition.

Resulting recommendations from the discussion

  • Review how technology solutions could enable your move to T+1, as these are not as expensive as often thought, but will need to be a part of a planned migration.
  • Where possible, run simulations of how your business will operate after T+1 and use this to build a successful transition plan.
  • Develop new KPIs targeting the transition to T+1 and use these to make data-driven decisions regarding your business.
  • Buy side and sell side need to work in tandem to understand the transition plan that works best between the two firms.
  • Sell side needs to share advice on how to transition and buy side needs to ensure that their processes are compliant.
  • Ensure that you effectively test your new systems with multiple parties across the settlement chain.

If you are interested in participating in one of the forthcoming roundtables, click the links below to find out further information and request a place. (Please note places are limited and will be confirmed subject to availability)

Stock Borrowing/Lending & Collateral/Liquidity Management – 14/11/2023

Data Challenges – 29/11/2023

ISITC Europe CIC would like to thank the T+1 Forum secretariat EY for hosting this series of micro- market round table discussions.