VIDEO | If there’s one thing the experts can agree on, it’s that T+1 transition in the Nordics should be taken in small incremental steps. At the PostTrade 360° Nordic 2024 conference, a panel of five discussed what the shortening of settlement cycles might look like for the region in the session titled “T+1 and the Nordics”.
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The good news is, the Nordics wouldn’t be starting the transition from zero, because it already has some of the fundamentals for success in place. “There has always been a tradition of investing in infrastructure,” said Mikkel Mördrup of larger asset owners in the region.
The senior vice president of Northern Trust added, “This is a New York-centric infrastructure thing that will have an impact on liquidity and on FX on a Friday afternoon more than it will have an impact on the infrastructure – I think that Nordic institutions are in a good place with automated processes.”
Danny Green, head of international post trade at Broadridge agreed. T+1 settlement happens “all the time” in Stockholm, he claimed, citing the same-day borrows his organisation does with its clients as an example. The transition is thus already achievable architecturally. The question that remains to be addressed is how to do it at scale.
Start early
Kamal Kannan, director at S&P Global Market Intelligence, is a little more cautious about Nordic readiness. “Smaller financial institutions might have problems upgrading their systems and processes,” he said. “But that is key, because T+1 will demand seamless coordination between the front, mid, and back offices.”
Based on the transition in the US, his observation was that the “pre-work” was most important. “The creation of working groups and industry associations; ensuring collaboration; the implementation of playbooks; end-to-end testing – those were the key pillars.”
Green is a proponent of starting preparations early. “You don’t have to wait for regulations or to be told what T+1 looks like. You can already identify where the friction is,” he pointed out. Addressing workflow issues is simply “good hygiene that doesn’t have to be driven by the shortening of the settlement cycle”.
The panel acknowledged that prioritising the transition could be a challenge, given that there are currently several regulatory changes that are pulling the attention of market participants in different directions. TARGET2 comes to mind. Some, such as the Digital Operational Resilience Act (DORA), have a tighter deadline than T+1.
Small steps
Despite the challenges, Green recommended organisations not put T+1 on the back burner. “The longer you leave it, the more expensive it’s going to get for you,” he said. The key is to begin now to take “small incremental steps over a period of time”. These steps can even be incorprated into the everyday work of other projects. He shared an example: when looking at resilience requirements for DORA implementation, also consider “what that would look like in a T+1 world”.
Michele Pitts, the managing director and global head of custody data at Citi is of the same opinion. She suggested tackling batch systems as a starting point. “Take an inventory of all your systems and the processes by which they flow down… Remove batches; get more seamless end-to-end connectivity.”
If nothing else, Barnaby Nelson, CEO of The ValueExchange believes that the one “necessary precondition of success” is to get allocations to T+0. Second to that would be “communicating them and matching them seamlessly before going to bed”.
Panelists:
Danny Green, Head of International Post Trade, Broadridge
Mikkel Mördrup, SVP, Northern Trust
Michele Pitts, Managing Director, Global Head of Custody Data, Citi
Kamal Kannan, Director, S&P Global Market Intelligence
Moderator:
Barnaby Nelson, CEO, The ValueExchange
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