Many firms “shockingly unprepared” for T+1, ISITC Summit panellist says
24 March 2023 US
Image: ImagesRouges/stock.adobe.com
The financial services industry “is halfway through a marathon” in its preparations for T+1, according to a panellist at this year’s ISITC Summit in Boston.
The statement opened ‘T+1: In Industry Checkpoint’, which discussed the state of T+1 preparations in 2023, what’s been done so far and where areas of weakness remain.
Citi managing director Michele Pitts stated that effective preparation “comes down to education.” This was echoed by a second panellist, who stressed that firms need to know the technology and operating options available to them if they are not yet able to meet the T+0 confirmations, affirmations and allocations required in a T+1 market.
Katelyn O’Grady, vice president at Brown Brothers Harriman (BBH), affirmed that successful conversion to a T+1 settlement cycle will be dependent on each entity in the ecosystem achieving their own readiness. To an extent, service providers “will be reliant on their clients’ success” — BBH is therefore focusing on partnering with clients in this effort. She added that the educational process must go both ways, with firms learning from their clients as much as they are teaching them. This helps to “highlight new areas” that need improvement, she explained. Communication is essential, ensuring that clients have the right information and systemic risk can be reduced.
Commenting on operational challenges that need to be considered in the face of T+1, Tom
Damico, managing director and global head of equities operations at J.P. Morgan, noted that “The company is continuing to leverage its global footprint by reviewing functions impacted by T1 to determine the best structure to facilitate its “follow-the-sun” approach.”
One panellist reminded the audience that all processes will need to be up to speed in a shortened settlement cycle — the process can only be as fast as its slowest component.
One of the most apparent challenges that T+1 will bring is that of cut-off times. Compressed timeframes will require processes to be streamlined, or even completely changed, Pitts commented. This may include the intensification of pre-settlement work, she said.
Building on the importance of preparatory work across the value chain, O’Grady suggested that partnerships with data services teams to gain access to real time, transparent, transactional data will become critical to understanding the impacts of T+1 on complex operations, such as securities lending services, and can help to illuminate how a trade impacts and is impacted by other processes. One panellist reported the use of third-party vendors in their company’s operations, with these collaborations allowing for greater interoperability and opportunities.
Regional markets do not operate in a vacuum, but Pitts reported that many EU and APAC clients are “shockingly unprepared” for the North American T+1 shift, assuming that it does not affect them. Returning to the importance of education, she affirmed that “all those involved in the US market have a stake in this” — they need to be aware of the rules.
The US markets’ shift “transcends boundaries” another speaker agreed, noting that many firms in the US are also unprepared. Many buy-side clients have waited until the SEC’s confirmation of final rules to begin their analysis, leaving them well behind where they need to be.
Closing the panel, one speaker stated that “there should be a regulatory mandate to invest in [straight-through processing technology]. Even if firms “take the T+1 wrapper off, [they] should be doing this anyway to improve operations.”
The statement opened ‘T+1: In Industry Checkpoint’, which discussed the state of T+1 preparations in 2023, what’s been done so far and where areas of weakness remain.
Citi managing director Michele Pitts stated that effective preparation “comes down to education.” This was echoed by a second panellist, who stressed that firms need to know the technology and operating options available to them if they are not yet able to meet the T+0 confirmations, affirmations and allocations required in a T+1 market.
Katelyn O’Grady, vice president at Brown Brothers Harriman (BBH), affirmed that successful conversion to a T+1 settlement cycle will be dependent on each entity in the ecosystem achieving their own readiness. To an extent, service providers “will be reliant on their clients’ success” — BBH is therefore focusing on partnering with clients in this effort. She added that the educational process must go both ways, with firms learning from their clients as much as they are teaching them. This helps to “highlight new areas” that need improvement, she explained. Communication is essential, ensuring that clients have the right information and systemic risk can be reduced.
Commenting on operational challenges that need to be considered in the face of T+1, Tom
Damico, managing director and global head of equities operations at J.P. Morgan, noted that “The company is continuing to leverage its global footprint by reviewing functions impacted by T1 to determine the best structure to facilitate its “follow-the-sun” approach.”
One panellist reminded the audience that all processes will need to be up to speed in a shortened settlement cycle — the process can only be as fast as its slowest component.
One of the most apparent challenges that T+1 will bring is that of cut-off times. Compressed timeframes will require processes to be streamlined, or even completely changed, Pitts commented. This may include the intensification of pre-settlement work, she said.
Building on the importance of preparatory work across the value chain, O’Grady suggested that partnerships with data services teams to gain access to real time, transparent, transactional data will become critical to understanding the impacts of T+1 on complex operations, such as securities lending services, and can help to illuminate how a trade impacts and is impacted by other processes. One panellist reported the use of third-party vendors in their company’s operations, with these collaborations allowing for greater interoperability and opportunities.
Regional markets do not operate in a vacuum, but Pitts reported that many EU and APAC clients are “shockingly unprepared” for the North American T+1 shift, assuming that it does not affect them. Returning to the importance of education, she affirmed that “all those involved in the US market have a stake in this” — they need to be aware of the rules.
The US markets’ shift “transcends boundaries” another speaker agreed, noting that many firms in the US are also unprepared. Many buy-side clients have waited until the SEC’s confirmation of final rules to begin their analysis, leaving them well behind where they need to be.
Closing the panel, one speaker stated that “there should be a regulatory mandate to invest in [straight-through processing technology]. Even if firms “take the T+1 wrapper off, [they] should be doing this anyway to improve operations.”
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