Spotlight: U.S. T+1 is just around the corner

By Val Wotton (pictured) – Managing Director, Institutional Trade Processing and President & CEO of DTCC ITP LLC

In a year’s time, the U.S. will be moving to T+1 settlement for transactions in U.S. cash equities, corporate debt, and unit investment trusts. As accelerating the settlement cycle to T+1 will have impact across the trade lifecycle, Val Wotton shares his views on:

Testing

With only one year to go before the May 28, 2024 implementation date for T+1 in the U.S., market participants should already have preparations under way in order to provide sufficient time for industry-wide testing. The volume of changes being implemented to support the move to T+1 in the U.S., combined with the number of firms making changes, requires testing to be coordinated across many touchpoints to ensure readiness and a successful industry implementation.

Manual processing

To meet the accelerated settlement timeframe, it is critical that market participants eliminate manual processes and maximise automation in the post-trade pre-settlement space. Specifically, the SEC highlighted that institutional trades must be allocated, confirmed, and affirmed as soon as is technologically possible and no later than trade-date, referred to as Same Day Affirmation (SDA).  

Central matching

It is important to note that automated solutions to help market participants achieve SDA already exist. Simply switching from manual to automated processes for allocation, confirmation, and central matching significantly reduces the number of post-trade exceptions as well as costly reconciliation efforts. Trade affirmation and instruction for settlement can be fully automated when a centrally matched trade between an investment manager and executing broker occurs, eliminating the need for either party to take further action.

Getting ready

DTCC is working in partnership with the Securities Industry and Financial Markets Association (SIFMA) and the Investment Company Institute (ICI) to educate and assist market participants on the requisite preparations for T+1 to ensure a smooth industry implementation on May 28, 2024.