A number of FinTech companies have expressed concerns about the upcoming implementation of the T+1 settlement cycle in North America, reports the Asset Servicing Times. The T+1 settlement cycle is scheduled to take effect on May 28.

Alex Knight, head of EMEA at Baton Systems, and James Pike, interim CEO of Taskize, highlight potential challenges that the shorter settlement cycle could impose on the industry.

Knight pointed out that manual processing systems might struggle under the increased pressure. “It’s going to be a tough ride with a lot of stressed people working longer hours to meet these new, tighter timeframes. The market has relied on post-trade processes requiring manual intervention for too long. While this was manageable with more time to resolve issues, the move to shorter timelines heightens the pressure,” Knight states.

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Not prepared

Pike echoed Knight’s concerns, noting that the industry is not fully prepared for T+1. “Industry participants have partly addressed the technological shift from T+2 to T+1 but haven’t adequately prepared for the increased number of exceptions this change will generate. Better preparedness around exception processing is essential,” he explains.

Managing expectations

These apprehensions arise as the US Securities and Exchange Commission (SEC) released a statement welcoming the transition. SEC Chair Gary Gensler emphasised the benefits, stating, “For everyday investors who sell their stock on a Monday, shortening the settlement cycle will allow them to get their money on Tuesday. It will make our market plumbing more resilient, timely, and orderly.”

The SEC successfully shortened the settlement cycle from T+3 to T+2 in 2017 and acknowledges that moving to T+1 may pose challenges, especially in terms of managing exceptions and operational adjustments.