U.S. T+1: Assess the Downstream Impacts of Split Investor Settlement

March 21, 2024
  • Investor Services
Protect your operating model and distribution relationships by understanding the downstream impact of changing your investor settlement periods, Killian Lonergan warns asset managers.

Operational time compression under U.S. T+1 securities settlement has compelled more asset managers to focus on changes to their entire operating model. With a little over 60 days remaining until the implementation of the shorter cycle, many are also considering shortening their shareholder settlement model1 to better align with securities settlement and minimize fund liquidity mismatches.

One notable area that we are seeing misunderstood by managers is the bifurcation of subscription and redemption cycles. The fact that the U.S. National Securities Clearing Corporation (NSCC) cannot manage different subs and reds cycles seems to be flying under the radar, despite its serious implications. A discussion on bifurcated investor cycles formed part of our recent BBH Talking T+1 webinar, but the NSCC specificities were not covered in detail.

Managers can better shield their distribution ecosystem and operating models through thorough, proactive planning.

Understand the Impacts to Your Entire Ecosystem

Until now, asset managers have mostly focused their T+1 efforts on the U.S. securities settlement aspects and trade affirmations, as well as funds where the underlying assets are U.S. based. But T+1 offshore fund settlement cycle decisions are coming to the fore and few offshore funds will likely look to mirror the T+1 settlement period.

Others are reviewing the possibility of addressing liquidity concerns by amending their model to split shareholder settlement periods across subscription and redemption trades.

In all cases, the impact on specific operating capabilities and requirements of the entire value chain – from the asset manager, through the Transfer Agent, to fund distribution platforms, and the investor – must be fully understood. For T+1 readiness, an asset manager is only as strong as their weakest link. They must understand not only their own operating model, but also that of all parties involved in the trade placement and settlement process.

For instance, not all fund platforms can manage different settlement terms for buys and sells. So instead of disrupting your existing fund distribution, you must ensure that dividing trades is operationally viable. This requires close interaction with all stakeholders in your chain.

Let’s take a closer look at this fund platform example in the context of funds that are sold through the NSCC.

NSCC Considerations

The NSCC is a rich source of inflows for many UCITS and other offshore funds. For example, as our 2024 Fund Distribution Outlook reveals, a quarter of asset managers we surveyed are looking to raise assets in Latin America, which is most often done by the use of the NSCC platform.

With nearly 18,000 CUSIPs (share classes) listed at the NSCC as ‘offshore,’ many managers need to be aware of the possibilities and limitations of this important distribution channel. Key considerations include:

  • The NSCC will change all U.S. onshore share classes from today’s T+2 to T+1 on the go live date of May 28th, 2024.
  • Just as offshore CUSIPs were out of scope during the move from T+3 to T+2 in 2017, these funds will not be required to align with the T+1 onshore requirement.
  • On May 28th, NSCC will amend classes presently listed as T+1 and with a USN2 currency to USD, impacting both onshore and offshore classes.
  • The longstanding requirement that a CUSIPs’ settlement period must be the same for subscriptions and redemptions will remain unchanged.

Keeping the CUSIP requirement means there is no option for a manager to split their settlement period as some are currently contemplating for certain UCITS sub-funds. In the process of setting up a CUSIP on the NSCC Fund/SERV model asset managers should remember there is only one settlement period asked for, not one per transaction type.

The main broker / dealers trading in the offshore space will also have to mirror the requirement. Therefore, if the NSCC forms a material part of your distribution strategy for your UCITS, bifurcation is not a viable option in practice. Other fund platforms may have similar constraints.


In summary, asset managers should not make concrete decisions on changing shareholder settlement periods at the transaction level without understanding the downstream impact for their distribution ecosystem. Those that do may have to backtrack or risk fracturing distribution relationships due to an operating model that simply can’t be accommodated.

Up Next
Up Next

Blog: BBH on T+1

We break down the latest updates on the T+1 Settlement transition and provide insights from our conversations with clients, industry groups, consultants, and peers.

1The majority of UCITS funds are currently on a T+3 settlement cycle for investors.
2The 'N' in 'USN' refers to 'next'. It’s next day settlement related. In practice it means if a fund wishes to settle a USN trade, tomorrow, i.e. the next day, the trade confirm must be received today by 8pm EST. So, for a T+1 trade, the confirm must be sent today. Whereas, when it's USD and T+1, the confirm can be received on the morning of T+1 (prior to 11am EST) and still settle on time.

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