T+1 in the US and Canada for Securities Finance: A Data Challenge

Finadium
September 2023

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For securities finance, the T+1 settlement transition in the US and Canada is unlike other T+ migrations: new deadlines will pressure front-to-back workflows for agent lenders, banks, brokers, custodians and their clients. This report assesses the major data challenges ahead for the industry as T+1 deadlines approach in May 2024.

Accelerated settlement continues the regulatory-induced trend of historically middle and back office functions moving to the front office, and traders having to consider post-trade costs such as margin, collateral and inventory at trade time. This reflects the growing importance and balance sheet implications of what has been previously assumed to be post-trade activity.

Major market structure changes like T+1 give market participants a choice between creating patchwork solutions versus making fundamental shifts in thinking around long-embedded processes. Securities finance market participants are considering their options but time is growing short. The transition period could potentially be hectic, with some firms taking advantage of new opportunities in risk, liquidity, business economics and common market practices while others fall back on ad hoc solutions to solve short-term data requirements. The transition also raises questions about whether T+1 is the optimal or even the end state for the North American settlement cycle.

This report should be read by securities finance business, operations and technology practitioners looking to cement their T+1 frameworks and gain the perspective of their peers. It may also be useful in encouraging industry-wide coordination on key data challenges.

Table of Contents

• Executive Summary
• T+1 2024 Overview
• T+1 in North American Securities Finance
• – Concerns by Market Participant
• Securities Finance Technology and Data Shifts
• – Market Infrastructure: Holding the Center
• Should T+0 Be An Industry Objective?
• Appendix A: Benefits and Challenges of T+1 Settlement
• About Finadium LLC