The shift to T+1 in North America is now done and dusted – or is it, really? Speaking to a number of industry insiders after the momentous day, The Trade learns the opinion on the ground is that we are only at the beginning, not end, of the transition.

Larry Tabb, director of market structure research at Bloomberg Intelligence, says that post-T+1, “significant” complications remain, especially “around the movement of currencies, how institutional investors execute larger orders, the borrowing and lending of securities, how ETFs that span borders are created and redeemed, and how corporate actions are managed”.

He believes that failed transactions will increase, and possibly even double or triple. “Larger asset managers, especially global ones, will need to borrow more funds to fulfill their settlement obligations, and financial institutions’ operational staff will need to work longer hours, to ensure that accelerated cut off times are met, and if not, manage the level of same day cash and securities movements needed.”

PostTrade 360 Nordic 2024

Not all see benefits

John Bevil, senior solutions manager at data automation software provider Xceptor is concerned that firms “seated away from the North American epicentre” will be affected by additional costs and struggle to see the true benefit of T+1 to themselves.

In the medium term, he expects that “corrective lessons would have been learnt, market performance will be analysed to the nth degree, and technology and automation will be more tailored to the initial challenges, with solutions reimagined solving for inefficiencies”.

Operational bandwidth

Tiago Vega, CEO of reconciliation software provider Aurum Solutions and Alex Knight, head of EMEA at fintech firm Baton Systems agree that the shift to a shorter settlement cycle will be the toughest on the technology and operations teams. Both point out that staff will have tighter deadlines, be under more pressure, and possibly work longer hours.

“I expect more firms will need to streamline, automate and massively simplify post-trade workflows, as manually handling these tasks will be unmanageable in the long term,” says Knight.

Challenges in FX           

For Vikas Srivastava, chief revenue officer at FX fintech firm Integral, the work to integrate equity and FX trading systems “will need to continue even though the deadline has passed”.

“Executing FX trades against unconfirmed or unmatched equity trades will result in higher levels of settlement failures,” he says. Tighter integration of trading systems is the only tangible solution as it “allows the process of the back-office confirming the US cash equities trade and then the information flowing to the FX trading systems to happen seamlessly with very low chance of errors”.