The temptation to make tactical changes to core post-trade processes to comply with the May 2024 T+1 deadline is understandable. However, since other markets are considering similar moves, this approach misses the opportunity to lay the foundation for a more efficient operating model, that can flex to shorter settlement deadlines globally. The move to T+1 presents asset managers with the chance to enhance their operating models to improve efficiencies in trade settlement. This will help them facilitate compliance with T+1 and be better prepared for an eventual move towards T+0.
5 Simple Steps to Seize the T+1 Moment
1. Ramp up your readiness
With your impact assessments on post trade processing and systems well underway, act on steps that are duplicative or require manual intervention, move away from batch processing, where possible, and replace applications like macros and spreadsheets with more resilient and scalable technologies. Ask your asset servicers for data on receiving timely allocations to manage confirmations, affirmations, breaks, settlements, and securities lending recalls in the new environment. Engage with counterparties, including custodians, broker dealers, and securities lending agents to ensure they are operating with a high state of readiness and to understand if service level agreements, operational procedures, and contracts need to be updated. Understanding the ownership of various changes between your organization and theirs’ will be critical.
2. Leverage utility solutions
Industry platforms, such as SWIFT and DTCC, will be integral to automating the confirmation, affirmation, and settlement process and reducing the number of exceptions to be repaired in a condensed window. Some of these require less investment than others depending on whether incremental solutions specific to T+1 are required, e.g. the TradeSuite Match 2 Instruct service, or gaining access to SWIFT for the first time.
3. Assess resource impacts
Determine what changes need to be made to staffing models to organize around T+1. For non-U.S. managers, for example, having resources available on T+1 until 11.30am EST will be key to managing exceptions before the deadline, whether they are located in the region or remotely on a shift pattern.
4. To outsource, or not?
Locating teams in the U.S. is expensive and poses potentially significant technology changes. Is T+1 your opportunity to outsource non-core functions to give access to more scalable models and free up resources for core activities? For example, trade management and integrated operational FX execution are mature and globally supported managed services by most asset servicers.
5. Determine the role of emerging technology
Robotic process automation and machine learning can play an important role in eliminating manual processing and identifying, and fixing problems, such as potential fails before they occur through predictive analytics. These solutions are only as good as the data on which they are built. Therefore, access to historic and well-structured data sets is essential. These are also solutions that asset servicers could help you to deploy.
The clock is ticking. With less than one year until T+1 and as internal deadlines to secure investment and resources looms, firms need to embrace change now to be ready for shorter settlement deadlines. The above steps, while not exhaustive, represent a good starting point to help you to seize the T+1 moment.
Brown Brothers Harriman & Co. (“BBH”) may be used to reference the company as a whole and/or its various subsidiaries generally. This material and any products or services may be issued or provided in multiple jurisdictions by duly authorized and regulated subsidiaries. This material is for general information and reference purposes only and does not constitute legal, tax or investment advice and is not intended as an offer to sell, or a solicitation to buy securities, services or investment products. Any reference to tax matters is not intended to be used, and may not be used, for purposes of avoiding penalties under the U.S. Internal Revenue Code, or other applicable tax regimes, or for promotion, marketing or recommendation to third parties. All information has been obtained from sources believed to be reliable, but accuracy is not guaranteed, and reliance should not be placed on the information presented. This material may not be reproduced, copied or transmitted, or any of the content disclosed to third parties, without the permission of BBH. All trademarks and service marks included are the property of BBH or their respective owners.© Brown Brothers Harriman & Co. 2023. All rights reserved. IS-08989-2023-06-08