The securities industry is currently facing a transition from T+2 to T+1, as it did for the move from T+4 to T+3 in 2004 and similarly T+3 to T+2 in 2017. Previous reductions of the settlement cycle have enabled market participants to rationalise the post-trade settlement activity, and the upcoming change to T+1 is no different in that regard. Moving to a 24-hour settlement cycle is driven by expected benefits such as: Reduction of Risk, better utilisation of Capital, and overall Capital and Operational efficiencies. With so much added benefit to be realised from the transition to a T+1 settlement cycle, it is important for fundamental challenges of the transition to be identified and navigated through transparent communication. It is essential that there is coordination among industry participants and service providers within the market alike. Here we will look to open the question of the role which financial technology vendors will play in the upcoming transition.
As most are already aware, the utilisation of third-party technology providers is prevalent across the industry due to their ability to support automation, reduce operations risk and, generally, optimise and standardise operational processes. The cost of these advantages is apparent in firms’ reduced control of technology vendors’ development roadmaps and delegation of operation and technological support services to the technology providers. Industry participants will have critical dependencies upon their technology vendors in transitioning to a reduce settlement cycle and should ensure to enhance and kick start their 3rd party risk assessment framework to fully capture and have plans to address these key dependencies. Post-trade process automation, speed and accuracy of trade matching (all within a tightly managed risk and control framework to enable a robust exception management process) are a few of the areas where we at Quorsus are seeing clients having strong reliance on the technology providers during the upcoming transition, which begs the question: On the Road to T+1 – Are your Vendors Onboard?
Here at Quorsus we’re drawing upon our vantage point as a consulting services provider to leverage our Subject Matter Expertise across Securities, Financial Markets Infrastructure and Technology to understand not only the causal relationship between the upcoming changes in the market and required changes to financial technology providers, but also how best to navigate these challenges to deliver on the core principals of our firm – Quality, Accountability, Outcomes, and Integrity. The headwinds which are emerging as part of the migration to T+1 do not have one-size-fits-all solutions and the onus is on us as market leaders to understand how to appropriately advise on tailoring those solutions to the needs of a diverse client-base. Automation, bespoke technology investment, process rationalisation and settlement efficiency are all tools which, if leveraged correctly, can create an optimal, cost-effective and tailored solution for a firm’s move to a reduced settlement cycle.
If any of the challenges above resonate with you, or if you would like to find out more about our vendor assessment framework and how we can help your firm prepare for the switch to T+1, please email ChiefClientOffice@Quorsus.com to get in touch with our team of Securities experts.