The Depository Trust & Clearing Corporation (DTCC) announced that 350 investment managers are now using the clearinghouse’s Central Trade Matching (CTM) platform’s automated trade affirmation capabilities to accelerate the post-trade lifecycle, as firms prepare for the US move to T+1 trade settlement.
The number of buy-side firms who also leverage CTM’s Match to Instruct (M2i) workflow with a broker/dealer counterpart has increased by 91% since the start of 2023, with those clients achieving a near 100% same-day affirmation (SDA) rate by 9PM on trade date. The use of M2i is optimal in achieving SDA which is critical to meeting US T+1 settlement timelines. CTM is offered as part of DTCC’s Institutional Trade Processing (ITP) suite of services.
As the financial services industry prepares for the upcoming U.S. move to T+1 settlement on May 28, 2024, firms are looking closely at their post-trade processes. Read Finadium News & Opinion’s interviews with EquiLend and Bloomberg and check out Finadium’s recent T+1 report.
CTM is DTCC Institutional Trade Processing’s (ITP’s) central matching service for cross-border and domestic transactions across multiple asset classes. The adoption of CTM’s M2i workflow, which involves subscriptions to CTM, TradeSuite ID, and SSI enrichment via ALERT, helps facilitate clients to achieve T+1 settlement, as it automatically triggers trade affirmation and the delivery of instructions for DTC-eligible securities directly to the Depository Trust Company (DTC) for settlement when a trade match occurs between an investment manager and executing broker. By automating the allocation, confirmation and affirmation processes, clients can significantly reduce the time required to stage trades for settlement at the DTC.
Val Wotton, managing director and general manager of DTCC Institutional Trade Processing said in a statement: “Clients utilizing CTM benefit from central matching and auto-affirmation capabilities that accelerate the trade lifecycle and are often more efficient when compared to local matching and affirmation by the custodian or institution. With the global financial services industry preparing for the U.S. move to T+1, adoption of CTM and the auto-affirmation workflows continues to increase, along with the realization of its benefits to market participants.”
DTCC has also released a new T+1 scorecard, available through its ITP Data Analytics service at no additional cost to its CTM community. The scorecard allows CTM clients to view the timeliness and efficiency of their operational processes through the lens of T+1, compiling underlying trade data and providing a dynamic dashboard interface with industry benchmarks, trend analysis, and operational metrics such as total trade volume submitted, timeliness of parties submitting trades in CTM, number of manual touches, and timeliness of affirmations by the affirming party.
Also, in early 2024, DTCC will expand its trade archival service ahead of the T+1 implementation for subscribing CTM clients to meet their recordkeeping obligations as a Registered Investment Adviser (RIA) as set forth by the US Securities and Exchange Commission (SEC) adopted amendments to Rule 204-2, which requires RIAs that are parties to any transactions subject to the requirements of Rule 15c6-2 (e.g., transactions with SEC-registered brokers subject to SDA) to make and keep records of confirmations received, and allocations and affirmations sent, each with a date and time stamp.
“Given the number of post-trade functions that are impacted by T+1, it is critical that market participants gain an in-depth understanding of their operational efficiency and record keeping obligations as soon as possible,” Wotton said in a statement. “We stand ready to help the industry successfully navigate this move, as we have done for earlier accelerations of the settlement cycle, and in offering best practice solutions to both aid in compliance as well as deliver new benefits.”