Since shortening the US equity cycle in 1995 from T+5 to T+3, there has been a continued analysis and positioning to further shortening the number of business days from trade to settlement. In October 2014, a total of 29 countries, including France, Belgium, the Netherlands, Sweden, Finland, the UK and Ireland shortened their settlement cycle to T+2. As of Q3 of next year (2017), the United States will join them in having the shorter settlement period.
T+2 Settlement Implications
There will be many implications for nearly all players in the financial markets with T+2, as well as potential benefits. Reduced risks in institutional trade exposure, clearing houses, and failures to settle are just some of the key elements for why the The Depository Trust & Clearing Corporation (DTCC) and other major players have defended their positions for shortening the settlement cycle. But as GFMI’s author, Charlotte Scott, presents in her newest article “Migration to T+2 Settlement,” there will also be many considerations that extend well beyond the IT departments and back offices.
T+2 Settlement Industry Considerations
In her article, Charlotte provides a firsthand insight as to the forthcoming challenges and changes, and offers valuable resources, such as external white papers and playbooks that were developed with the Industry Steering Committee (ISC) as commissioned by the DTCC.
A consultant and trainer of Securities Operations topics as well as IT concerns, Charlotte is an incredible resource to GFMI in educating our clients in these arenas. Her direct and comprehensive manner of delivering what could be either complex, or boring, information and processes is incredibly engaging and enlightening. Besides delivering industry training seminars, Ms. Scott maintains a flourishing management consulting practice providing advisory services for both buy-side and sell-side firms. These services include new business development and analysis, and strategic process re-engineering, focused on Middle and Back Office Operations for derivatives, equities, and fixed income. Her project experience spans business process re-engineering, policy and procedure development, and third party vendor identification, assessment, selection and customization.
T+2 Settlement Training is Critical
As we approach this all-important deadline, knowledge will be key to a successful migration. GFMI is here to help your employees, in all departments, to get a grip on T+2 plus its related needs, challenges and rewards. As Charlotte mentions in her article, GFMI has recently introduced an exciting new one-day training program that will provide important information on T+2 enablers within the context of the business, and their consequential impact on the following areas:
- Static and Reference Master File Data Set-Up for Products
- Standing Settlement Instruction (SSI) Data Management
- Order and Trade Management
- Same Day Trade Matching/Affirmation
- Clearance and Securities Settlement Systems
- Trade Funding and Payments Processing
- Fail Management
- Cross-border Trading and Foreign Exchange lifecycle
- Income Processing and Corporate Actions: ex-date and the cover/protect period
- Margin and Collateral Management
- Securities Lending and Loan Recalls
- Option Exercises and Assignments