DTCC warns on affirmation rates ahead of imminent T+1 deadline

DTCC analysis shows that in January 2024, 73% of transactions were affirmed by the DTC cutoff time of 9:00PM ET on trade date. In February, the number increased to 74.5%. When considering specific market segments as of the end of February 2024:

• Prime broker affirmation rate: 83% (up from 81% in January)
• Investment manager auto affirmation (central match) rate: 89% (down from 92% in January)
  • In February, DTCC’s ITP added 26 new Investment Managers to the CTM auto affirmation workflow, bringing the total to 369. As Investment Managers on-board, and configure their Brokers, this affirmation rate will increase. This rate is expected to normalize to 92%+ ahead of T+1.
• Custodian or investment manager (self) affirmation rate: 53% (up from 51% in January)
  • Self-affirmation is supported by DTCC’s TradeSuite ID. Over 1,150 TradeSuite IDs have been added in Q1 2024 so far, providing Investment Managers with greater transparency into affirmation rates, as well as enabling them to move to an Auto Affirmation (central) model, as needed, to achieve significantly higher affirmation rates.

In a statement, DTCC wrote: “The U.S. transition to a T+1 settlement cycle is two months away, and market participants are continuing preparations as the May 28, 2024, implementation date approaches. Many firms continue to focus on enhancing operational efficiencies, including the achievement of same-day affirmation.

“With two months left until the T+1 implementation date, market participants must ramp up their preparations and testing. At the same time, we encourage continued collaboration between Investment Managers and their custodians. By optimizing settlement workflows and embracing automation in the post-trade affirmation process, market participants will be better positioned to achieve T+1.”

As per SEC Exchange Act Rule 15c6-2, Broker-dealers must take actions to ensure that 100% of all trades are affirmed as soon as technologically practicable and no later than the end of trade date, and DTCC recommends organizations affirm over 90% of their transactions by 9:00PM ET on trade date to maintain current market efficiencies. If firms are unable to make the 9:00PM ET DTC cutoff and the cutoff for affirmed prime brokerage activity to settle via DTCC’s Continuous Net Settlement System (CNS), bilateral transactions can be settled by having the deliverer issue a night delivery order (NDO) by 11:30PM ET on trade date or a day delivery order (DDO) on T+1.

NDOs and DDOs are more costly and operationally intensive than those affirmed by 9:00PM ET. Because of this, DTCC recommends that market participants leverage automated affirmation workflows to seamlessly affirm trades by 9:00PM ET on trade date, including the use of TradeSuite ID.

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