Clearstream Banking is technically prepared for the shift to T+1 settlement, with its real-time settlement platform already handling the majority of settlements on a T+0 basis, says CEO Philip Brown. In an interview with Delano Magazine, he discusses the implications of the US settlement shift and predicts challenges for its international clients, particularly those in Asia.
Have you signed up yet for PostTrade 360° Nordic, in Stockholm on 4–5 September? Your ticket is free of charge! Meet Philip Brown there, joining as an opening panel speaker.
One challenge of the shift to T+1 is the shortened settlement window, affecting clients with investments in US dollars. “A large percentage of the investments of Asian clients are in US dollar instruments, as the US is by far the world’s largest capital market,” elaborates Brown. Time zone differences exacerbate this issue, limiting the window for issue resolution. “This is particularly challenging for clients running batch processes, which can only be executed once a day.”
Another challenge is that the foreign exchange market settlement is on a T+2 basis. “This misalignment means clients needing to secure US dollars for investments must plan in advance or face potentially unfavourable currency rates,” underscores Brown.
The CEO also highlights uncertainties in the securities lending market for all its clients. The shorter recall period under T+1 settlement in the US requires securities to be returned more quickly. Brown therefore thinks that there will be an unknown impact on securities lending.