T+1 expected to have ‘notable impact’ on securities lending and borrowing, Citi whitepaper says
23 August 2023 UK
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More than three quarters of market participants expect accelerated settlements to have a major impact on their business, according to Citi’s most recent ‘Securities Services Evolution' whitepaper.
Additionally, 80 per cent of those polled expect that there will be a notable impact on their securities lending and borrowing businesses.
The whitepaper, which is the third in a series, reports that cash, funding and liquidity management are seen as the primary obstacles to achieving a shorter settlement cycle.
In order to prepare for the transition, Citi states that clients and counterparties are the initial priority for market participants. Following this, in-house platforms and processes and staffing and location strategies will be key focus points.
As part of their planning, 69 per cent of firms are centering automation and the standardisation of client communications. A similar figure (64 per cent) expect to upgrade or replace their technology platforms.
Outside of T+1, the paper also considers the future of distributed ledger technology (DLT) and digital assets initiatives. These were engaged with by almost a quarter of those polled, a significant increase from the report’s 2022 findings where only 47 per cent were involved in the space.
Close to 90 per cent of those surveyed believe that digital money, such as CBDCs and stable coins, are a viable way to support securities settlement, up from the 72 per cent who held this opinion in last year’s whitepaper.
More than 500 market participants took part in the study globally, with quantitative and qualitative data gathered from 12 financial market infrastructures and industry participants.
Commenting on the findings, Okan Pekin, global head of securities services at Citi, says: “Our research shows that the rapidly accelerating move to T+1 in major markets poses significant challenges to industry participants, leaving an urgent need to drive innovation, automation and efficiencies in global operating models.”
Matthew Bax, global head of custody for securities services at Citi, states: “As market infrastructures continue to evolve, it’s increasingly important for industry participants to work in partnership to strengthen the stability of the overall ecosystem. Supporting innovation while maximising global consistency of the client experience remains core to our securities services offering.”
Additionally, 80 per cent of those polled expect that there will be a notable impact on their securities lending and borrowing businesses.
The whitepaper, which is the third in a series, reports that cash, funding and liquidity management are seen as the primary obstacles to achieving a shorter settlement cycle.
In order to prepare for the transition, Citi states that clients and counterparties are the initial priority for market participants. Following this, in-house platforms and processes and staffing and location strategies will be key focus points.
As part of their planning, 69 per cent of firms are centering automation and the standardisation of client communications. A similar figure (64 per cent) expect to upgrade or replace their technology platforms.
Outside of T+1, the paper also considers the future of distributed ledger technology (DLT) and digital assets initiatives. These were engaged with by almost a quarter of those polled, a significant increase from the report’s 2022 findings where only 47 per cent were involved in the space.
Close to 90 per cent of those surveyed believe that digital money, such as CBDCs and stable coins, are a viable way to support securities settlement, up from the 72 per cent who held this opinion in last year’s whitepaper.
More than 500 market participants took part in the study globally, with quantitative and qualitative data gathered from 12 financial market infrastructures and industry participants.
Commenting on the findings, Okan Pekin, global head of securities services at Citi, says: “Our research shows that the rapidly accelerating move to T+1 in major markets poses significant challenges to industry participants, leaving an urgent need to drive innovation, automation and efficiencies in global operating models.”
Matthew Bax, global head of custody for securities services at Citi, states: “As market infrastructures continue to evolve, it’s increasingly important for industry participants to work in partnership to strengthen the stability of the overall ecosystem. Supporting innovation while maximising global consistency of the client experience remains core to our securities services offering.”
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