The move to T+1 in the US and Canada is less than a year away. Yet, there remains many technical and operational challenges to tackle before the May 2024 go-live date, says a recent report by post trade and risk management platform Torstone Technology. Players on both the buy-side and sell-side have a lot of shaping up to do if they were to avoid non-compliance.
The report gives an overview of the challenges of transitioning to a T+1 cycle, citing three main areas that require special attention:
• System readiness – current infrastructure has to be upgraded to cope with the accelerated settlement cycle. Failure to do so may result in operational bottlenecks, system crashes, and settlement delays.
• Interoperability – coordination between the buy-side and sell-side will become key. Foreign investors are likely to face obstacles due to the difference in settlement cycles in different markets.
• Compliance – As the regulatory landscape continues to evolve around the new settlement cycle, market participants will have to keep up with new rules.
Brian Collings, CEO of Torstone Technology comments in the report that “the days of manual processes and batch processing are numbered as they don’t align with the shift to truncated settlement cycles. Companies must modernise and automate their middle and back office systems or face substantial operational risks”.
The report suggests that companies should adopt phased programmes to streamline post-trade workflows. Strategic long-term plans should also be made to ensure that the infrastructure can handle future shifts to T+0 settlement.